TY - GEN
T1 - Strategic information platforms - Selective disclosure and the price of "free"
AU - Hajaj, Chen
AU - Sarne, David
PY - 2014
Y1 - 2014
N2 - This paper deals with platforms that provide agents easier access to the type of opportunities in which they are interested (e.g., eCommerce platforms, used cars bulletins and dating web-sites). We show that under various common service schemes, a platform can benefit from not necessarily listing all the opportunities with which it is familiar, even if there is no marginal cost for listing any additional opportunity. The main implication of this result is that platforms should extract their expected-profit-maximizing service terms not based solely on the fees charged from users, but they should also use the subset that will be listed as the decision variable in the optimization problem. The analysis applies to four well-known service schemes that a platform may use to price its services. We show that neither of these schemes generally dominates the others or is dominated by any of the others. For the common case of homogeneous preferences, however, several dominance relationships can be proved, enabling the platform to identify the schemes that should be used as a default. Furthermore, the analysis provides a game-theoretic search-based explanation for a possible preference of buyers to pay for the service rather than receive it for free (e.g., when the service is sponsored by ads), a phenomena that has been justified in prior literature typically with the argument of willingness to pay a premium for an ad-free experience or more reliable platforms. The paper shows that this preference can hold both for the users and the platform in a given setting, even if both sides are fully strategic.
AB - This paper deals with platforms that provide agents easier access to the type of opportunities in which they are interested (e.g., eCommerce platforms, used cars bulletins and dating web-sites). We show that under various common service schemes, a platform can benefit from not necessarily listing all the opportunities with which it is familiar, even if there is no marginal cost for listing any additional opportunity. The main implication of this result is that platforms should extract their expected-profit-maximizing service terms not based solely on the fees charged from users, but they should also use the subset that will be listed as the decision variable in the optimization problem. The analysis applies to four well-known service schemes that a platform may use to price its services. We show that neither of these schemes generally dominates the others or is dominated by any of the others. For the common case of homogeneous preferences, however, several dominance relationships can be proved, enabling the platform to identify the schemes that should be used as a default. Furthermore, the analysis provides a game-theoretic search-based explanation for a possible preference of buyers to pay for the service rather than receive it for free (e.g., when the service is sponsored by ads), a phenomena that has been justified in prior literature typically with the argument of willingness to pay a premium for an ad-free experience or more reliable platforms. The paper shows that this preference can hold both for the users and the platform in a given setting, even if both sides are fully strategic.
KW - economics of information
KW - platforms and services
KW - price of free
KW - service schemes
KW - two-sided markets
UR - http://www.scopus.com/inward/record.url?scp=84903211659&partnerID=8YFLogxK
U2 - 10.1145/2600057.2602864
DO - 10.1145/2600057.2602864
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AN - SCOPUS:84903211659
SN - 9781450325653
T3 - EC 2014 - Proceedings of the 15th ACM Conference on Economics and Computation
SP - 839
EP - 856
BT - EC 2014 - Proceedings of the 15th ACM Conference on Economics and Computation
T2 - 15th ACM Conference on Economics and Computation, EC 2014
Y2 - 8 June 2014 through 12 June 2014
ER -