Matching & Information Provision by One-Sided and Two-Sided Platforms

This paper studies a “market creating” firm that offers a matching environment, by charging an access fee, to a population of users who wish to form a match. We focus on an environment where users only observe a signal from their randomly assigned partner's type and the signal informativeness is controlled by the firm. Population of users is partitioned between high and low types, and we study the case high types dislike forming a match with low types. As the firm jointly determines the access fee and the informativeness of the signal, we study how both tools can be used to screen particular segments of the population. We characterize the set of optimal menus of access fee and information provision. We show the information provision has also a screening role when network effects are heterogeneous, otherwise the firm will use this tool to increase users' willingness to participate in the environment. Also we show that the profit maximizing and surplus maximizing firms will optimally offer a menu such that only high types participate, or where every user participates. In the former the signal is perfectly informative, in the latter is partially informative. Finally we show the profit maximizing firm will over-provide information vis-a-vis the surplus maximizing firm, and we show the higher the heterogeneity in the population, the higher the chance the optimal menu excludes low type users. The extension to the fully two-sided case is developed