Second-Degree Price Discrimination by a Two-Sided Monopoly Platform
- American Economic Journal: Microeconomics (Forthcoming)
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.
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