The Chinese University of Hong Kong-Tsinghua University Joint Research Center for Chinese Economy 清華大學-香港中文大學中國經濟聯合研究中心 - Non-Price Discrimination by a Prejudiced Platform The Chinese University of Hong Kong-Tsinghua University <br/>Joint Research Center for Chinese Economy 清華大學-香港中文大學中國經濟聯合研究中心
0032
Non-Price Discrimination by a Prejudiced Platform
Ming Gao, Travis Ng

Recent lawsuits and anecdotal evidence suggest that some platforms discriminate against certain users through non-price practices, discouraging their participation without directly increasing revenue. We show that a monopolist two-sided platform with a prejudice against certain users - modeled as more costly to serve - chooses to discriminate only if the cost savings from reducing such users’ participation outweigh the network benefits they create. Surprisingly, user surpluses may increase under discrimination because the platform often voluntarily lowers price(s) - sometimes on both sides - to attract other users. Therefore, tightening anti-discrimination policies for platforms can increase price and decrease welfare.

636
0032
Non-Price Discrimination by a Prejudiced Platform
Ming Gao, Travis Ng

Recent lawsuits and anecdotal evidence suggest that some platforms discriminate against certain users through non-price practices, discouraging their participation without directly increasing revenue. We show that a monopolist two-sided platform with a prejudice against certain users - modeled as more costly to serve - chooses to discriminate only if the cost savings from reducing such users’ participation outweigh the network benefits they create. Surprisingly, user surpluses may increase under discrimination because the platform often voluntarily lowers price(s) - sometimes on both sides - to attract other users. Therefore, tightening anti-discrimination policies for platforms can increase price and decrease welfare.

636