Essays on Platforms: Asymmetric Information, Search, and Policy

Abstract

The three essays of this thesis cover two sets of topics: search in auction platforms in the first two papers, and political campaigning in the last. In platform settings, search cost reductions are often regarded as beneficial because they improve match quality. But is this in fact true? And if it is true in an aggregate sense, what are the consequences to individual platform participants? Do individual buyers and sellers win or lose? The first paper develops a novel model of search in platforms and applies it to auction platforms to test the popular hypothesis that lower search costs are always beneficial to sellers. Under certain assumptions, we find that while lower search costs is welfare improving, its distributional consequences are less predictable. In general, lower search costs intesify buyer-side competition. On the one hand, this tends to improve seller revenues due to better matches; on the other hand, this may also thin out markets for certain sellers, since lower search costs make it easier for buyers to search out of certain markets. Generally, some sellers gain and some lose; most surprisingly, however, we find that overall seller revenue can decrease with lower search costs. Our second paper extends the model to endogenize buyer participation - so some buyers may leave the platform completely - and considers optimal platform search policy in such settings. Under stricter assumptions, we find that a platform that taxes the seller side generally benefits from lower search costs; a platform that charges buyers, however, may maximize search costs, since the gains from easier search are unevenly distributed among buyers, and may be inefficiently extracted with a fee. The final essay provides a novel model of political campaigning as argumentation, which brings together two different strands of the campaign spending literature: spending has direct effects on electoral outcomes, but also provide a "signal" of candidate quality. The model parsimoniously resolves many pre-existing campaign spending "paradoxes" while delivering new results on the effects and desirability of spending caps.