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Price Discrimination by a Two-sided Platform: with Applications to Advertising and Privacy Design

Author

Listed:
  • Doh-Shin Jeon

    (Toulouse School of Economics and CEPR. Manufacture de Tabacs, 21 allees de Brienne - 31000 Toulouse, France.)

  • Byung-Cheol Kim

    (School of Economics, Georgia Institute of Technology. 221 Bobby Dodd Way, Atlanta, GA 30332, USA.)

  • Domenico Menicucci

    (Dipartimento di Scienze per l’Economia e l’impresa, Universit`a degli Studi di Firenze. Via delle Pandette 9, I-50127 Firenze (FI), Italy)

Abstract

We study price discrimination by a monopoly two-sided platform who mediates interactions between two different groups of agents. We adapt a canonical model of second-degree price discrimination `a la Mussa and Rosen (1978) to a two-sided platform by focusing on non-responsiveness, a clash between the allocation the platform wants to achieve and the incentive compatible allocations. In this framework we address the key question of when a price discrimination on one side complements or substitutes a price discrimination on the other side. We offer two applications on advertising platforms and also highlight the role of commitment in eliciting personal information for targeted advertising.

Suggested Citation

  • Doh-Shin Jeon & Byung-Cheol Kim & Domenico Menicucci, 2015. "Price Discrimination by a Two-sided Platform: with Applications to Advertising and Privacy Design," Working Papers 15-08, NET Institute.
    • Handle: RePEc:net:wpaper:1508
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    References listed on IDEAS

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    More about this item

    Keywords

    price discrimination; two-sided markets; non-responsiveness; privacy; advertising; positive/negative sorting;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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