Template-Type: ReDIF-Paper 1.0

Author-Name: Johannes Muthers
Author-X-Name-First: Johannes 
Author-X-Name-Last: Muthers

Author-Name: Sebastian Wismer
Author-X-Name-First: Sebastian 
Author-X-Name-Last: Wismer

Title: Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation
	
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.

Length:  30 pages
Creation-Date:  2012-02
File-URL: http://www.bgpe.de/texte/DP/115_MuthersWismer.pdf
File-Format: Application/pdf
File-Function: First version, 2012
Number: 115
Classification-JEL: D40, L14, L81
Keywords: Intermediation, Platform Tariff, Hold-Up Problem
Handle: RePEc:bav:wpaper:115_MuthersWismer