Platform Pricing Structure and Moral Hazard," Australian

We study pricing by a monopoly platform that matches buyers and sellers in an envi-ronment with cross-market externalities. Said platform has no private information, does not set the commodity’s price and can only charge trading parties for the match. Our innovation consists in introducing moral hazard on the sellers ’ side and an equilibrium no-tion of platform reputation in an infinite horizon model. With linear fees the platform can mitigate, but not eliminate, the loss of reputation induced by moral hazard. If lump-sum fees (registration fees) can be levied, moral hazard can be overcome. The upfront pay-ment determines the participation threshold of sellers and extracts them, while (lower) transactions fees provide incentives for good behavior. This breaks the equivalence of lump-sum payments and linear fees (Rochet and Tirole (2006)). We draw implications for the role of subsidies (Caillaud and Jullien (2003)). JEL Classification: L11,L12,L14,L81D21,D82