Platform Competition under Asymmetric Information
American Economic Journal: Microeconomics
vol. 5,
no. 3, August 2013
(pp. 22-68)
Abstract
We consider platform competition in a two-sided market, where the two sides (buyers and sellers) have ex-ante uncertainty and ex-post asymmetric information concerning the value of a new technology. We fi nd that platform competition may lead to a market failure: competition may result in a lower level of trade and lower welfare than a monopoly, if the diff erence in the degree of asymmetric information between the two side is below a certain threshold. Multi-homing solves the market failure resulting from asymmetric information. However, if platforms can impose exclusive dealing, then they will do so, which results in market inefficiency.Citation
Halaburda, Hanna, and Yaron Yehezkel. 2013. "Platform Competition under Asymmetric Information." American Economic Journal: Microeconomics, 5 (3): 22-68. DOI: 10.1257/mic.5.3.22Additional Materials
JEL Classification
- D41 Market Structure and Pricing: Perfect Competition
- D42 Market Structure and Pricing: Monopoly
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 Monopoly; Monopolization Strategies
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