A Price Theory of Multi-sided Platforms: Comment
- (pp. 2758-60)
AbstractWeyl (2010) shows that in multi-sided platform settings, profit maximization leads to classical and Spence distortions, with the Spence distortion providing a new explanation for why prices may sometimes be too high (or too low) on platforms. However, the key formulas Weyl gives comparing privately and socially optimal prices are misstated. Properly interpreted, his results only explain marginal incentives with respect to setting prices and not the total distortion in prices, which can be very different.
CitationTan, Hongru, and Julian Wright. 2018. "A Price Theory of Multi-sided Platforms: Comment." American Economic Review, 108 (9): 2758-60. DOI: 10.1257/aer.20172018
- D42 Market Structure, Pricing, and Design: Monopoly
- D85 Network Formation and Analysis: Theory
- L12 Monopoly; Monopolization Strategies
- L14 Transactional Relationships; Contracts and Reputation; Networks