Transparency and Control in Platforms for Networked Markets

Abstract

In this paper, we analyze the worst-case efficiency loss of online platform designs under a networked Cournot competition model. Inspired by some of the largest platforms in operation today, we study a variety of platform designs to examine the impacts of market transparency and control on the worst-case efficiency loss of Nash equilibria in networked Cournot games. Our results show that open access designs incentivize increased production toward perfectly competitive levels and limit efficiency loss, while controlled allocation designs lead to producer-platform incentive misalignment, resulting in low participation rates and unbounded efficiency loss. We also show that discriminatory access designs balance transparency and control, achieving the best of both worlds by maintaining high participation rates while limiting efficiency loss.

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