Transparency and Control in Platforms for Networked Markets

Abstract

Platforms: How Much and What Should They Control? Platforms exert control in many ways: from determining which buyers are shown to which sellers to directly controlling allocation of aggregate supply across different consumer markets. How should platforms exercise control to increase social welfare? In “Transparency and Control in Platforms for Networked Markets,” authors J. Pang, W. Lin, H. Fu, J. Kleeman, E. Bitar, and A. Wierman examine the trade-offs that emerge between efficiency loss, transparency, and control across different platform designs. They show that open access platforms incentivize increased production toward perfectly competitive levels and limit efficiency loss, whereas controlled allocation designs can lead to supply-side withholding, resulting in unbounded efficiency loss. Balancing transparency and control, discriminatory access designs strictly improve upon the worst-case efficiency loss of both open access and controlled allocation platforms. Besides providing insights into the design and operation of two-sided platforms, this paper contributes to the growing theory of Cournot competition in networked markets.