Designing a two-sided platform
Subtitle: when to increase search costs?
By: Andrei Hagiu, Bruno Jullien
Contributors: Jullien, Bruno; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 08-010; Working paper (Harvard Business School. Division of Research) -- 08-010
Publisher: Division of Research, Harvard Business School
Published: 2007
Place of publication: Boston]
Language: eng
Number of pages: 45
Description: We propose a model for analyzing an intermediary's incentives to increase the search costs incurred by consumers looking for sellers (stores). First, we show that the quality of the search service offered to consumers is more likely to be degraded (i.e. the probability that consumers find their favorite store in the first round of search is less than 1) when the intermediary derives higher revenues from consumers shopping at the lesser-known store relative to revenues from consumers shopping at the more popular store. Second, the intermediary may have an incentive to degrade the quality of search even further when its design decision influences the prices charged by stores. By altering the composition of demand faced by stores, the intermediary can force the latter to price lower and thereby increase total consumer traffic.
Notes: "August 2007"--Publisher's web site.

Includes bibliographical references.