Platform Disintermediation: Information Effects and Pricing Remedies

Two-sided platforms typically generate revenue by matching prospective buyers and sellers and extracting commissions from completed transactions. Disintermediation, where sellers transact offline with buyers to bypass commission fees, can undermine the viability of these platforms. While transacting offline allows sellers to avoid commission fees, it also leaves them fully exposed to risky buyers given the absence of the platform's protections. In this paper, we examine how disintermediation and information quality -- specifically, the accuracy of the signal sellers receive about a buyer's type -- jointly impact a platform's revenue and optimal commission rate. In a setting where transactions occur online-only, an increase in information quality leads sellers to set more efficient prices, which lifts platform revenue. However, if sellers can transact offline, this effect may be reversed -- additional information about buyers can hurt platform revenue by reducing the risk sellers face offline, amplifying disintermediation. Further, while intuition suggests platforms should counter disintermediation by lowering commission rates, in a high-information environment a platform may be better off by raising them. Lastly, while charging sellers platform-access fees can hedge against losses from disintermediation, it can fall short of the revenue attained under commission-based pricing when all transactions occur online.