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“Sherlocking” and Platform Information Policy

Author

Listed:
  • Jay Pil Choi
  • Kyungmin Kim
  • Arijit Mukherjee

Abstract

Platform-run marketplaces may exploit third-party sellers’ data to develop competing products, but potential for future competition can deter sellers’ entry. We explore how this trade-off affects the platform’s referral fee and its own entry decision. We first characterize the platform’s optimal referral fee under full commitment on entry decision and study its economic implications. We then analyze the extent to which the platform’s own information sharing policy substitutes for its commitment to entry. We characterize the platform’s optimal information policy and examine how it interacts with the platform’s fee structure. Our findings highlight the importance of considering the platform’s fee structure as a regulatory response in the policy debates on marketplace regulation.

Suggested Citation

  • Jay Pil Choi & Kyungmin Kim & Arijit Mukherjee, 2023. "“Sherlocking” and Platform Information Policy," CESifo Working Paper Series 10769, CESifo.
    • Handle: RePEc:ces:ceswps:_10769
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    References listed on IDEAS

    as
    1. Andrei Hagiu & Tat‐How Teh & Julian Wright, 2022. "Should platforms be allowed to sell on their own marketplaces?," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 297-327, June.
    2. Erik Brynjolfsson & Yu (Jeffrey) Hu & Duncan Simester, 2011. "Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales," Management Science, INFORMS, vol. 57(8), pages 1373-1386, August.
    3. Justin P. Johnson & Andrew Rhodes & Matthijs Wildenbeest, 2023. "Platform Design When Sellers Use Pricing Algorithms," Econometrica, Econometric Society, vol. 91(5), pages 1841-1879, September.
    4. Andrei Hagiu & Julian Wright, 2015. "Marketplace or Reseller?," Management Science, INFORMS, vol. 61(1), pages 184-203, January.
    5. Annabelle Gawer & Rebecca Henderson, 2007. "Platform Owner Entry and Innovation in Complementary Markets: Evidence from Intel," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 1-34, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    hybrid platforms; referral fee; information design;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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