Information disclosure and cursed consumers in two-sided platforms

Details

Supervisors

Johnen, Johannes

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité approfondie

Abstract

Each online platform exhibits ratings, reviews, and other product information in its own way. Platforms might facilitate or harden quality comparison. Indeed, the degree to which consumers can distinguish between good and bad products is often up to the market intermediaries. I study the incentives of two-sided platforms to inform their consumers about quality differences. In particular, I analyze such incentives when some consumers are cursed, that is, when they do not understand the relationship between the prices and quality. By controlling the degree of transparency in the market, platforms can adjust the degree of competition between firms to manipulate network externalities between buyers and sellers. First, I find that when platforms host more low-quality sellers, they inform consumers less. Second, I explain that stronger competition between sellers might further decrease information in the market and hurt uninformed consumers. Finally, I connect these findings with the current debate on platforms’ regulation.