Affiliation:
1. CORE/LIDAM, Université catholique de Louvain , Belgium
2. Budapest University of Technology and Economics & HUN-REN Centre for Economic and Regional Studies , Hungary
Abstract
Abstract
Many products sold on online platforms have additional features like fees for services, shipping, luggage, upgrades, and so on. We study when a two-sided platform shrouds additional features towards potentially naive buyers. We explore a novel mechanism according to which platforms shroud to manipulate network externalities between buyers and sellers. Exploring this mechanism, we argue the advent of online marketplaces led to less transparent markets. First, platforms have stronger incentives to shroud seller fees than sellers themselves. Second, platforms shroud their own fees less if they earn more revenue from sellers; so when sellers on the platform compete more fiercely, platforms—somewhat perversely—shroud more. We connect these results to many applications and the current debate on regulating online platforms.
Funder
Action de Recherche Concerée
FNRS
FWO
National Research Development and Innovation Office
Publisher
Oxford University Press (OUP)
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