TILEC Work In Progress: Florian Schuett

We study the design of online platforms that aggregate information and facilitate market transactions. Two different platform designs can be observed in the market: revealing platforms which disclose the identity of transaction partners (e.g. Booking) and anonymous platforms which do not (e.g. Hotwire). To analyze the implications of this design choice for profits and surplus, we develop a model in which consumers differ in their location as well as their preferred product variety. Sellers offer their products for sale both directly (`offline') and indirectly via the platform (`online') but are unable to credibly disclose the product variety they offer when selling offline. The model gives rise to a novel tradeoff associated with the anonymous platform design: when buying offline, consumers observe location but not variety; when buying online, they observe variety but not location. While the revealing design leads to more informed consumers and better matches, the anonymous design allows sellers to price discriminate and introduces competition between sellers whose markets would otherwise be segmented. We show that the comparison between the designs depends crucially on whether information about location is relatively more important than information about variety. When the relative importance of the two types of information is in an intermediate range, the anonymous design outperforms the revealing design in terms of both profits and welfare.

Time: 10:45-11:45

Host:Florian Schütt  

Moderator: Konrad Borowicz

* For more information regarding this event please contact M. van Genk ,  24 hours before the event at latest.