A Preference-Based Model of Competition among Platforms

We propose a novel approach to study competition among platforms. In particular, we consider representative consumer's preferences over the services platforms provide and the commodities they intermediate. Platforms are assumed to be large, intermediating a variety of commodities offered by sellers under monopolistic competition and free entry, and competing à la Cournot. We use a duopoly setting to discuss the welfare implications of platform exchange commissions, which are typically significant in real-world cases. Our preliminary finding is that positive commission actually worsens consumer welfare by reducing the platform price-adjusted quality indexes