Platforms that intermediate trades—such as Amazon, Airbnb, and eBay—play a regulatory role in deciding how to govern the marketplaces they create. We propose a framework to analyze a platform's nonprice governance design and its incentive to act in a welfare-enhancing manner. We show that the platform's governance design can be distorted toward inducing insufficient or excessive seller competition, depending on the nature of the fee instrument employed by the platform. These results are illustrated with micro-founded applications to a platform's control over seller entry, information provision and recommendations, quality standards, and search-design choices.
American Economic Journal: Microeconomics,
Firm Behavior: Theory
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Information and Product Quality; Standardization and Compatibility
Organization of Production
Retail and Wholesale Trade; e-Commerce