Platform pricing structure and moral hazard

Guillaume Roger, Luís Vasconcelos

Research output: Contribution to journalArticleResearchpeer-review

7 Citations (Scopus)

Abstract

We study pricing by a two-sided platform when it faces moral hazard on the sellers' side. In doing so, we introduce an equilibrium notion of platform reputation in an infinite horizon model. We find that with transaction fees only, the platform cannot eliminate the loss of reputation induced by moral hazard. If registration fees can be levied, moral hazard can be overcome. The registration fee determines the participation threshold of sellers and extracts them, whereas (lower) transaction fees provide incentives for good behavior. This provides a motivation for platforms to use registration fees in addition to transaction fees.

Original languageEnglish
Pages (from-to)527-547
Number of pages21
JournalJournal of Economics and Management Strategy
Volume23
Issue number3
DOIs
Publication statusPublished - 2014
Externally publishedYes

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