Managing Market Thickness in Online B2B Markets
We explore marketplace design in the context of a B2B platform specializing in liquidation auctions and establish that the platform’s ability to use its design levers to manage the availability of supply over time yields significant value. Exploiting a natural experiment, we illustrate that consolidating auctions’ ending times to certain weekdays increases the platform’s revenues by 7.3% by inducing a higher level of bidder participation. Also, we estimate a structural model that endogenizes bidders’ dynamic behavior and find that appropriately designing a recommendation system yields an additional revenue increase by reducing supply-side cannibalization and altering the composition of participating bidders.