Information Provision

We develop a dynamic game-theoretic model of a two-sided platform that allows for heterogeneity and endogenous behavior on both sides of the market. We focus on illustrating the potential benefits of optimal information provision in terms of managing supply-side decisions, including supplier entry/exit and pricing. Our analysis identifies the mechanisms through which information design may increase platform revenues. Finally, we highlight the role of information design as a substitute for commission subsidies during cold start. Overall, our numerical experiments suggest that, by influencing the providers’ decisions, optimal information provision can lead to a substantial increase in platform revenues.

We investigate the problem of optimal information provision when the goal is to maximize aggregate consumer surplus. We illustrate how a designer can (partially) alleviate the inefficiency involved in information gathering by employing a policy that strategically obfuscates past data and show that the optimal information-provision policy can be obtained as the solution of a large-scale linear program.