Platform Governance and Information Disclosure in Markets with Add-Ons

Digital platforms display sellers' prices and collect ad valorem commissions. We study how these roles shape sellers' disclosure choices and a platform's incentives to regulate them. Sellers offer a base good and an avoidable add-on, which some consumers overlook when choosing sellers. Because commissions apply to the base good but not off-platform add-ons, add-on profit is passed through more than one-for-one into lower base-good prices, creating a competition multiplier. Hidden add-on prices can reduce efficiency while raising consumer surplus through this mechanism. A platform regulates disclosure to protect commission revenue, while mandatory transparency can improve efficiency but reduce consumer surplus.