Customers pay in the form of personal information and attention to advertising content.
The researchers also found that improving the quality of the lower level service hurts the intermediary's profits. Bhargava's co-authors, both at Carnegie Mellon University, are Vidyanand Choudhard, assistant professor in the Graduate School of Industrial Administration, and Ramayya Krishnan, the Cooper Professor at The Heinz School of Public Policy and Management. Bhargava says even a brief canvass of the Web will show that the industry is already practicing this limited two-level product and pricing strategy. Online auctions, such as eBay, charge both buyers and sellers. However, the two level strategy explains why you can't bargain with eBay to let you sell your late Aunt Bertha's prize porcelain bird collection online for less than the usual 2 to 3 percent they normally charge sellers.