CORE Brown Bag Seminar

Leonardo MADIO 

(University of Padova)

will give a presentation on :

Design and governance of quality on a digital platform

This paper studies the incentives of a platform to curate quality of third-party products it hosts. There are two types of sellers. "Normal sellers'' have heterogeneous intrinsic quality and can enhance their quality through effort. "Bad sellers" have zero quality and never exert effort.  Quality is unobserved to consumers who rely on a rating system to form beliefs on product quality. We show that the platform  may intentionally host bad sellers to induce more effort by normal sellers, even if it can identify and block bad sellers at zero cost. We determine the conditions on the distribution of normal sellers' quality and effort cost function under which the platform has these incentives. We also show that a social planner might also want to have some bad sellers on board. Moreover, tolerating bad sellers can also be a more effective tool to induce more effort than making the rating system more stringent.

• Leonardo Madio : https://sites.google.com/view/leonardomadio/