Strategic Release of Information in Platforms: Entry, Competition, and Welfare.

Information Disclosure in Platforms: Optimizing Volumes and Prices Can Harm Consumers Two-sided platforms reduce frictions and facilitate trade in many sectors, and, in doing so, they increasingly collect and process data about supply and demand. The paper "Strategic Release of Information in Platforms: Entry, Competition, and Welfare" by Kostas Bimpikis and Giacomo Mantegazza shows that platforms can increase their profits by strategically disclosing (coarse) information that they collected about demand to the supply side. However, this practice may also adversely impact the welfare of consumers. By designing its information disclosure policy, a platform can influence the entry and pricing decisions of its potential suppliers. In general, it is optimal for platforms to disclose their information only partially to either "nudge" entry when it is costly for suppliers to join or discourage it when suppliers do not have valuable outside options. On the other hand, consumers may end up worse off due to higher prices compared with when the platform refrains from sharing any demand information. Two-sided platforms play an important role in reducing frictions and facilitating trade, and in doing so they increasingly engage in collecting and processing data about supply and demand. This paper establishes that platforms have an incentive to strategically disclose (coarse) information about demand to the supply side, as this can considerably boost their profits. However, this practice may also adversely affect the welfare of consumers. By optimally designing its information disclosure policy, a platform can influence the entry and pricing decisions of its potential suppliers. In general, it is optimal for the platform to disclose its information only partially to either "nudge" entry when it is a priori costly for suppliers to join or, conversely, discourage it when suppliers do not have access to attractive outside options. On the other hand, consumers may end up being worse off, as they have access to fewer trading options and/or face higher prices compared with when the platform refrains from sharing any demand information to its potential suppliers. Supplemental Material: The e-companion is available at https://doi.org/10.1287/opre.2022.2402. [ABSTRACT FROM AUTHOR]