Pricing control and marketplace design

Gerry Tsoukalas

11.8.24

Digital marketplaces are becoming increasingly vital for the real-world adoption of emerging technologies. Gerry Tsoukalas (Boston University) examines their pricing structures, highlighting that while most use simple commission contracts to generate revenue, control over pricing varies: it may be centralized with the platform or decentralized, left to individual agents. We show these choices critically affect market outcomes (supply, adoption, welfare, etc.). Centralization enhances coordination but increases information asymmetry between the platform and its agents, whereas decentralization reverses this tradeoff. Neither approach is universally optimal. Using mechanism design, we propose a structural tweak to commission contracts, termed “affine pricing,” that can enable optimal market outcomes under either form of pricing control. We discuss implications for both established and emerging disintermediated web3 marketplaces governed by smart contracts.

About the presenter

Gerry is an Associate Professor of Information Systems at Boston University’s Questrom School of Business, with secondary appointments at the Wharton School, University of Pennsylvania, Cornell’s FinTech Initiative, and the Luohan Academy (Alibaba Group). Specializing in digital platforms and analytics (AI/ML), he co-founded the Crypto and Blockchain Economics Research Forum (CBER). He has collaborated with various firms and startups in technology, healthcare, and financial services, and worked on policy with government agencies and think tanks.

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