Non-Price Discrimination by a Prejudiced Platform

Recent lawsuits and anecdotal evidence suggest that some platforms discriminate against certain users through non-price practices, discouraging their participation without directly increasing revenue. We show that a monopolist two-sided platform with a prejudice against certain users - modeled as more costly to serve - chooses to discriminate only if the cost savings from reducing such users' participation outweigh the network benefits they create. Surprisingly, user surpluses may increase under discrimination because the platform often voluntarily lowers price(s) - sometimes on both sides - to attract other users. Therefore, tightening anti-discrimination policies for platforms can increase price and decrease welfare