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 find 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 difference 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.
Halaburda, Hanna, and Yaron Yehezkel.
"Platform Competition under Asymmetric Information."
American Economic Journal: Microeconomics,
Market Structure and Pricing: Perfect Competition
Market Structure and Pricing: Monopoly
Asymmetric and Private Information; Mechanism Design
Search; Learning; Information and Knowledge; Communication; Belief
Production, Pricing, and Market Structure; Size Distribution of Firms
Monopoly; Monopolization Strategies