TILEC Seminar: Antonio Russo (Institut Mines-Télécom Business School)| Platform Transaction Taxes and Freemium Pricing (joint with A. D'Annunzio)

Abstract

We study transaction taxes in markets where sellers adopt second-degree price discrimination by offering multiple versions of their product. We show that an ad valorem tax that targets the top version can alleviate the typical distortions in these markets, increasing consumer surplus and welfare. This targeting is natural with sellers that adopt “freemium” pricing, as in the case of digital goods like mobile apps. We explore the implications of these findings for platforms where these products are traded. In these markets, integration between platform and sellers can reduce welfare and consumer surplus. Moreover, selling devices that give consumers access to the marketplace (e.g., smartphones) and/or advertising induces the platform to set a higher transaction tax. By contrast, selling a product that competes with third-party sellers on the marketplace should induce the platforms to set a lower tax.

Speaker: Antonio Russo

Antonio Russo is a Professor of Economics at the Institut Mines-Télécom Business School, and a Research Fellow at CESifo. His main research interests are in Industrial Organization, Economics of Digital Platforms, Public Economics and Urban and Transportation Economics. His work is published in journals including RAND Journal of Economics, Management Science, Marketing Science, International Economic Review and Journal of Urban Economics.

Time: 10:45-11:45 hrs

Host: Shiva Shekhar
Moderator: Konrad Borowicz