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Price Controls in a Multi-Sided Market

Michael Sullivan, Harvard Business School/Western University
Friday, September 22, 2023
10:00-11:20 AM
This paper evaluates caps on the commissions that food delivery platforms charge to restaurants. Commission caps may lead restaurants to join platforms and to post lower prices on platforms, thereby benefitting consumers. But caps may also lead platforms to raise their consumer fees, thereby reducing ordering on platforms and consequently platforms’ value to restaurants. The net welfare effects of caps are thus uncertain. To quantify these effects, I estimate a model of pricing and platform adoption in a multi-sided market using data on consumer restaurant orders, restaurants’ platform adoption, and platform fees. Counterfactual simulations imply that commission caps harm consumers, bolster restaurant profits, and ultimately reduce total welfare.
Event Type: Workshop / Seminar
Tags: Economics, Industrial Organization, seminar
Source: Happening @ Michigan from Department of Economics, Applied Microeconomics/Industrial Organization, Department of Economics Seminars