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Quality screening and information disclosure in two-sided markets

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  • Wang, Jin

Abstract

This paper studies how a platform can use quality screening to alleviate the asymmetric information problem between users on the two sides. We consider two screening mechanisms through which a platform communicates the quality information from one side to the other: minimum threshold and multiple thresholds. For each mechanism, we derive the equilibrium outcome and conduct welfare analysis. It shows that the optimal screening rule is determined by the magnitude (or the distribution) of the cross-group externalities and the operation cost of the platform.

Suggested Citation

  • Wang, Jin, 2018. "Quality screening and information disclosure in two-sided markets," Economics Letters, Elsevier, vol. 171(C), pages 183-188.
    • Handle: RePEc:eee:ecolet:v:171:y:2018:i:c:p:183-188
    DOI: 10.1016/j.econlet.2018.07.034
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    References listed on IDEAS

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    1. Doh-Shin Jeon & Jean-Charles Rochet, 2010. "The Pricing of Academic Journals: A Two-Sided Market Perspective," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 222-255, May.
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    4. Justin P. Johnson & David P. Myatt, 2003. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," American Economic Review, American Economic Association, vol. 93(3), pages 748-774, June.
    5. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    6. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    7. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
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    More about this item

    Keywords

    Two-sided market; Quality screening; Minimum threshold; Multiple thresholds;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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