Platform Pricing under Dispersed Information

We study monopoly and duopoly pricing in a two-sided market with dispersed information about users’preferences. We …rst show how the dispersion of information introduces idiosyncratic uncertainty about participation rates and how the latter shapes the elasticity of the demands and thereby the equilibrium prices. We then study informative advertising campaigns and product design a¤ecting the agents’ability to estimate their own valuations and/or the distribution of valuations on the other side of the market. JEL classi…cation: D82 Keywords: two-sided markets, dispersed information, platform competition, global-games, informative advertising An earlier version circulated under the title "Platform Competition under Dispersed Information." For useful comments and suggestions, we thank Mark Armstrong, Marco Ottaviani, Michael Riordan, Patrick Rey, Jean Tirole and seminar participants at Berkeley Haas, Bocconi University, the 2013 CSIO-IDEI Conference, Universidad Carlos III of Madrid, NYU Stern, and the 2013 SAET Conference. Pavan also thanks the National Science Foundation and Nokia for …nancial support and the University of California at Berkeley for hospitality during the 2011-1012 academic year. Emil Temnyalov provided excellent research assistance.