Search and resale frictions in a two-sided online platform: A case of multi-use assets

Yoshimoto, H. and Nakabayashi, J. (2019) Search and resale frictions in a two-sided online platform: A case of multi-use assets. Journal of Economic Behavior and Organization, 162, pp. 85-105. (doi:10.1016/j.jebo.2019.04.013)

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Abstract

How large are two-sided transaction costs in online platform trades, and who are the major beneficiaries of friction cost reductions? Using a dataset of a multi-use train ticket resale market, we analyze the welfare structure with buyer-seller matching frictions on an online platform. Our model shows that competitive online resale market prices work as a conductor of transaction cost externalities, clarifying what types of buyers bear what friction costs. The estimation results show that individual-level welfare losses, which could be considered an online resale market dead-weight loss, are non-negligibly large and heterogeneous across buyers, ranging from 3% to 21% of the new good price. Welfare losses are particularly disadvantageous to users who demand small degrees of usage, as they are more likely to be excluded from trading opportunities. Our model also suggests that, when competitive resale markets experience friction cost reductions, welfare gains are larger among small degree users of resalable goods, providing an explanation for the recent expansion of high-turnover online trades.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Yoshimoto, Dr Hisayuki
Authors: Yoshimoto, H., and Nakabayashi, J.
Subjects:H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Economic Behavior and Organization
Publisher:Elsevier
ISSN:0167-2681
ISSN (Online):0167-2681
Published Online:13 June 2019
Copyright Holders:Copyright © 2019 Elsevier
First Published:First published in Journal of Economic Behavior and Organization 162:85-105
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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