Do Card Users Benefit From the Use of Proportional Fees?

Miao, Chun‐Hui

doi:10.1515/rne-2012-0011

Cited by 6 publications

(6 citation statements)

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“…Focussing on the hold-up problem, we show that proportional fees may be used to create investment incentives by increasing sellers' expected profits, contrary to the effects discussed in the extant literature (Shy & Wang, 2011;Miao, 2011;Z. Wang & Wright, 2011), where proportional fees are used by the platform operator to appropriate a larger share of sellers' profits.…”

Section: Discussionmentioning

confidence: 57%

“…Thereby, we abstract from the double marginalization effect that is the core of Shy andMiao (2011). Although the intermediary would face additional incentives to enter product markets if we introduced elastic demand into our model (entry decreases price, and, hence, mitigates the double marginalization problem), the commitment effect of proportional fees would still be present.…”

Section: Discussionmentioning

confidence: 99%

“…In their framework, sellers earn lower profits under proportional fees, but consumers are better off and social welfare is higher than under per-transaction fees. Miao (2011) extends the model of Shy and Wang (2011). Allowing for an endogenous number of sellers, he shows that the use of proportional fees results in less seller participation.…”

Section: Related Literaturementioning

confidence: 91%

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Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation

Muthers

Wismer

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractIf 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 profitable 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.

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Section: Discussionmentioning

confidence: 57%

Section: Discussionmentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 91%

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Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation

Muthers

Wismer

2013

SSRN Journal

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“…Assuming a …xed number of Cournot sellers, Shy and Wang (2011) show that the platform earns a higher pro…t by using a proportional fee than a per-transaction fee. Miao (2013) shows that the result continues to hold under free entry of sellers.…”

Section: Price Discriminationmentioning

confidence: 83%

Why Do Platforms Use Ad Valorem Fees? Evaluating Two Alternative Explanations

Wang¹

2019

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latforms that intermediate transactions between sellers and buyers have become increasingly important in the economy. People are familiar with, for example, online marketplaces (such as Amazon and eBay), payment platforms (such as Visa, MasterCard, and Paypal), and hotel booking sites (such as Booking.com and Expedia). However, there has been a great pricing puzzle associated with these platforms in that they almost universally rely on ad valorem fees, in which cases platforms charge sellers fees proportional to the transaction value plus sometimes small per-transaction fees. Given that these platforms do not incur signi…cant costs that vary with transaction value, it is puzzling why ad valorem fees are so prevalently used. In this article, we review two alternative explanations on this pricing puzzle. One theory, provided by Shy and Wang (2011) and others, emphasizes the vertical relation between the platform and the sellers. It is shown that in the case where the platform (i.e., the upstream) and the sellers (i.e., the downstream) both have market power (i.e., socalled "double marginalization") 1 , the platform extracts a higher pro…t

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“…However, there are a few recent exceptions which discuss proportional fees and, therefore, endogenize seller pricing (Shy & Wang, 2011;Miao, 2011;Wang & Wright, 2012;Muthers & Wismer, 2013). Nevertheless, these studies do not allow for sellers bypassing the platform ("direct sales") or any other form of competition between platforms.…”

Section: Platform Marketsmentioning

confidence: 99%

Intermediated vs. Direct Sales and a No-Discrimination Rule

Wismer

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWhen sellers join a platform to sell their products, the platform operator may restrict their strategic decisions. In fact, several platform operators impose most-favored treatment or no-discrimination rules (NDRs), asking sellers not to offer better sales conditions elsewhere.In this paper, I analyze a model that allows for an endogenous split-up of consumers between sales channels. Competing sellers might set different prices across channels, depending on the platform tariff and presence of a NDR. I find that the platform operator imposes a NDR if he faces high transaction costs, if seller competition is weak, and if the initial distribution of consumers on channels is strongly skewed. Prohibiting NDRs can have both positive and negative effects on welfare.

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Do Card Users Benefit From the Use of Proportional Fees?

Cited by 6 publications

References 0 publications

Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation

Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation

Why Do Platforms Use Ad Valorem Fees? Evaluating Two Alternative Explanations

Intermediated vs. Direct Sales and a No-Discrimination Rule

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