Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73452
Authors: 
Muthers, Johannes
Wismer, Sebastian
Year of Publication: 
2012
Series/Report no.: 
BGPE Discussion Paper 115
Abstract: 
If an intermediary offers sellers a platform to reach consumers, he may face the following hold-up problem: sellers suspect the intermediary will enter their respective product market as a merchant after they have sunk fixed costs of entry. Therefore, fearing that their investments cannot be recouped, less sellers join the platform. Hence, committing to not becoming active in sellers' markets can be profittable for the intermediary. We discuss different platform tariff systems to analyze this hold-up problem. We find that proportional fees (which are observed in many relevant real-world examples) mitigate the problem, unlike classical two-part tariffs (which most of the literature on two-sided markets examines). Thus, we offer a novel explanation for the use of proportional platform fees.
Subjects: 
Intermediation
Platform Tariff
Hold-Up Problem
JEL: 
D40
L14
L81
Document Type: 
Working Paper

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