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Second-Degree Price Discrimination by a Two-Sided Monopoly Platform

  • Doh-Shin Jeon
  • Byung-Cheol Kim
  • Domenico Menicucci
American Economic Journal: Microeconomics
vol. 14, no. 2, May 2022
(pp. 322-69)
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Abstract

We study second-degree price discrimination by a two-sided monopoly platform. The incentive constraints of the agents on the value creation side may be in conflict with internalizing externalities on the value capture side, which may render pooling optimal. Even without such conflict between the two sides, pooling may be optimal due to type-dependent Spence effects when the preferences of the marginal agents diverge from those of the average agents on the value capture side. We perform a welfare analysis of price discrimination and show that prohibiting price discrimination improves welfare when there is a strong conflict between the two sides.

Citation

Jeon, Doh-Shin, Byung-Cheol Kim, and Domenico Menicucci. 2022. "Second-Degree Price Discrimination by a Two-Sided Monopoly Platform." American Economic Journal: Microeconomics, 14 (2): 322-69. DOI: 10.1257/mic.20190369

Additional Materials

JEL Classification

  • D42 Market Structure, Pricing, and Design: Monopoly
  • D62 Externalities
  • D82 Asymmetric and Private Information; Mechanism Design
  • L12 Monopoly; Monopolization Strategies
  • L82 Entertainment; Media
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