Price Discrimination by a Two-Sided Platform: With Applications to Advertising and Privacy Design | Zendy

DohShin Jeon | Zendy; ByungCheol Kim | Zendy; Domenico Menicucci | Zendy

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Price Discrimination by a Two-Sided Platform: With Applications to Advertising and Privacy Design

Author(s) -

DohShin Jeon,

ByungCheol Kim,

Domenico Menicucci

Publication year - 2015

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.2672058

Subject(s) - advertising , internet privacy , consumer privacy , information privacy , online advertising , display advertising , business , computer science , world wide web , the internet

We study price discrimination by a monopoly two-sided platform who mediates interactions between two different groups of agents. We adapt a canonical model of second-degree price discrimination `a la Mussa and Rosen (1978) to a two-sided platform by focusing on non-responsiveness, a clash between the allocation the platform wants to achieve and the incentive compatible allocations. In this framework we address the key question of when a price discrimination on one side complements or substitutes a price discrimination on the other side. We offer two applications on advertising platforms and also highlight the role of commitment in eliciting personal information for targeted advertising.

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