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Platform Pricing Structure and Moral Hazard

Roger, G and Vasconcelos, L (2014) 'Platform Pricing Structure and Moral Hazard.' Journal of Economics and Management Strategy, 23 (3). 527 - 547. ISSN 1058-6407

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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. © 2014 Wiley Periodicals, Inc.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 14 Jan 2015 15:20
Last Modified: 04 Feb 2019 18:15
URI: http://repository.essex.ac.uk/id/eprint/12310

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