American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
A Price Theory of Multi-sided Platforms: Comment
American Economic Review
vol. 108,
no. 9, September 2018
(pp. 2758–60)
Abstract
Weyl (2010) shows that in multi-sided platform settings, profit maximization leads to classical and Spence distortions, with the Spence distortion providing a new explanation for why prices may sometimes be too high (or too low) on platforms. However, the key formulas Weyl gives comparing privately and socially optimal prices are misstated. Properly interpreted, his results only explain marginal incentives with respect to setting prices and not the total distortion in prices, which can be very different.Citation
Tan, Hongru, and Julian Wright. 2018. "A Price Theory of Multi-sided Platforms: Comment." American Economic Review, 108 (9): 2758–60. DOI: 10.1257/aer.20172018Additional Materials
JEL Classification
- D42 Market Structure, Pricing, and Design: Monopoly
- D85 Network Formation and Analysis: Theory
- L12 Monopoly; Monopolization Strategies
- L14 Transactional Relationships; Contracts and Reputation; Networks