`Information Doesn’t Want to Be Free’: Informational Shocks with Anonymous Online Platforms

• Authors: Amedeo Piolatto.
• BSE Working Paper: 110668 | July 20
• Keywords: experience goods , anonymous information platforms , mismatch costs , spokes model , horizontal competition
• JEL codes: D02, D21, D43, D61, D83, L11, L13, L15
• experience goods
• anonymous information platforms
• mismatch costs
• spokes model
• horizontal competition

Anonymous information platforms (e.g. Airbnb) provide information about experience goods while keeping agents’ identity hidden until the transaction is completed. In doing so, they generate heterogeneity in the information levels across consumers. In this paper, I show that such platforms induce a weak increase of fine prices and that only low-valuation goods are cheaper online than offline. Platforms always lead to an increase in profits. In terms of consumer welfare, the platform equilibrium is Pareto superior for low-and high-valuation goods, while for intermediate ranges some buyers benefit while others lose from the presence of the platform.