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Price Manipulation in Peer-to-Peer Markets and the Sharing Economy

Author

Listed:
  • Vladimir Pavlov

    (The Wharton School, University of Pennsylvania, 3730 Walnut St, Philadelphia, PA 19104 USA)

  • Ron Berman

    (The Wharton School, University of Pennsylvania, 3730 Walnut St, Philadelphia, PA 19104 USA)

Abstract
Should a peer-to-peer platform set prices for the products on the platform, or should it let sellers set their own prices while providing price recommendations? Centralized prices allow a platform to use demand information it observes, while price recommendations allow for competition in which sellers set prices based on their private information. On sharing economy platforms, for example, we observe a myriad of such pricing regimes. We investigate the implications of each pricing regime for the profits of platforms, buyers and sellers. When a platform recommends prices, it effectively plays the role of a sender in a multi-receiver cheap-talk game. platforms are not always better off by centralizing pricing. When the variance of aggregate demand is large, price recommendations can be sustained in equilibrium and are often more profitable for the platform. Otherwise, a price recommendation is not credible. High (low) quality sellers have a stronger (weaker) preference for centralized pricing than the platform. Buyers, in contrast, receive lower surplus when the platform provides price recommendations, and prefer centralized pricing or competition without price recommendations. The results provide tools for platform designers and policy makers to assess the impact of different pricing regimes in markets with platforms. Although price recommendations might seem to encourage lower prices among sellers through increased competition, this is not always the case.

Suggested Citation

  • Vladimir Pavlov & Ron Berman, 2019. "Price Manipulation in Peer-to-Peer Markets and the Sharing Economy," Working Papers 19-10, NET Institute.
    • Handle: RePEc:net:wpaper:19-10
    as

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    File URL: http://www.netinst.org/Berman_19-10.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Schlütter, Frank, 2022. "Managing Seller Conduct in Online Marketplaces and Platform Most-Favored Nation Clauses," LIDAM Discussion Papers CORE 2022026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    More about this item

    Keywords

    two-sided markets; peer-to-peer platforms; sharing economy; price recommendations; cheap talk;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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