Platform Competition with Free Entry of Sellers

We study platforms setting access prices and commissions on revenues of sellers engaged in monopolistic competition with free entry, as the app providers on the app stores of Apple and Android devices. Competition to attract buyers and sellers induces the platforms to redistribute all the revenues through lower access prices and set the optimal commission rates from the point of view of consumers, taking into account the pass-through on the prices of sellers, the elasticities of demand and surplus for their services and the elasticity of entry with respect to profitability. We discuss the role of heterogeneous sellers, substitutability between sellers's products and the introduction of platforms's products, as well as some limitations of the basic alignment of interest of platforms and consumers due to direct channels for sellers and consumer myopia.