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Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation

Author

Listed:
  • Muthers Johannes

    (Department of Economics, Johannes Kepler University Linz, Altenberger Straße 69, 4040 Linz, Austria)

  • Wismer Sebastian

    (Bundeskartellamt, Bonn, Germany)

Abstract

This paper deals with trade platforms whose operators not only allow third party sellers to offer their products to consumers, but also offer products themselves. In this context, the platform operator faces a hold-up problem if he uses classical two-part tariffs only as potential competition between the platform operator and sellers reduces platform attractiveness. Since some sellers refuse to join the platform, some products that are not known to the platform operator will not be offered at all. We find that revenue-based fees lower the platform operator’s incentives to compete with sellers, increasing platform attractiveness. Therefore, charging such proportional fees can be profitable, which may explain why several trade platforms indeed charge proportional fees.

Suggested Citation

  • Muthers Johannes & Wismer Sebastian, 2022. "Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation," Review of Network Economics, De Gruyter, vol. 21(2), pages 83-110, August.
    • Handle: RePEc:bpj:rneart:v:21:y:2022:i:2:p:83-110:n:3
    DOI: 10.1515/rne-2023-0020
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    References listed on IDEAS

    as
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    4. Federico Etro, 2021. "Product selection in online marketplaces," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(3), pages 614-637, August.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    intermediation; platform tariff; hold-up problem;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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