Amedeo Piolatto, Universidad Autónoma de Barcelona (UAB)

Paper: Platform Design and Rent Extraction

Abstract:
We study the design of online platforms that aggregate information and facilitate transactions. Leading players in the industry (e.g. the Booking Group) hold two types of platforms in their portfolio: revealing platforms that disclose the identity of transaction partners (like Booking.com) and anonymous platforms that do not (like Hotwire.com). Anonymous platforms o↵er discounts but lead to inecient matching between consumers and firms. We develop a model in which horizontally di↵erentiated firms sell to heterogeneous consumers both directly and via a platform that enlarges the pool of consumers they can attract. The platform charges firms for transactions it intermediates and can choose to o↵er an anonymous sales channel in addition to a revealing one. We show that o↵ering both sales channels is profitable not only because it allows the platform to implement price discrimination, as suggested by the literature on opaque selling, but also because it improves rent extraction.

The anonymous channel breaks the link between the price on the revealing channel and the firms’ outside option; moreover, it can reduce double marginalisation. The welfare impact of the anonymous channel is ambiguous: while it sometimes leads to market expansion, it also causes ineciently high transport costs.