In the papers pertinent to axis (i), I started noting that firms often sell basic goods as well as ancillary ones. Hold-up concerns have led to ancillary good regulations such as transparency and price caps (for instance, regarding surcharges on payment cards). To evaluate these policies, I developed an imperfect-information framework for the analysis of platform and social regulation of card surcharging and cash discounting. I showed that cash discounts are generally welfare-enhancing but are unlikely to be adopted by firms. By contrast, card surcharging is often excessive. Optimal regulation calls for a cap on surcharges that is strictly smaller than the merchant’s convenience benefit.
The hold-up narrative, however, runs counter to evidence in many retail settings where ancillary good prices are set below cost (eg free shipping). I argued that the key to unifying these conflicting narratives is that the seller may absorb partly or fully the ancillary good’s cost so as not to miss sales on the basic good. Optimal regulation, be the upstream market (of the ancillary good) competitive or monopolistic, entails a ban on loss-making sales.
In the papers pertinent to axis (ii), I first observed that online intermediaries greatly expand consumer information, but also raise sellers’ marginal costs by charging high commissions. My analysis reveals that price parity provisions generate market power to the platform, so much so to decrease firms and consumers’ welfare. I then showed that commission cap regulation can remedy this distortion, and derived ready-to-use formulas for the cap.
Parallel to the discussion above, I also considered the regulation of digital wallets offered by Big Techs, which combine features of payment services and search platforms. Optimal regulation typically differs from the standard Tourist Test employed to cap the interchange fees of payment cards. Two new forces are present: On the one hand, the platform must be remunerated for the informational gains it generates. On the other hand, too much adoption generates merchant internalization, which is detrimental to welfare.
Finally, I investigated how interoperability (or the lack thereof) affects intermediation fees in mobile payments. I identified important barriers to interoperability (for instance, the zero-lower bound on prices where data externalities are present), discussing the pros and cons of mandated interoperability.
The papers pertinent to axis (iii) focus on two-sided markets; namely, those in which agents match through a platform, which designs and prices matching opportunities. We introduced a model of (platform-mediated) many-to-many matching in which agents’ preferences are both vertically and horizontally differentiated. We first showed that, perhaps counter-intuitively, customized pricing may either increase or decrease targeting. Secondly, we investigated the welfare effects of customized pricing, showing that mandating uniform pricing typically increases welfare in advertising markets.
The dissemination strategy of this project was mostly based on scientific publications and seminars at various academic institutions. I also presented some of the research outcomes in policy circles, such as Ofcom, the European Commission (DG Comp) and the Central Bank of Brazil.
