<p>Why do marketplace apps often charge <em><strong>both</strong></em> sides of the transaction, when charging one side could raise as much (or more) revenue and be simpler?</p>
<p>i.e. if the marketplace knows which side of the market is less price sensitive than the other, wouldn't it make more sense to simply levy the entire fee on that side, rather than splitting it across both sides?</p>
<p>Example (<a href="https://www.econtalk.org/nathan-blecharczyk-on-airbnb-and-the-sharing-economy/" rel="nofollow noreferrer">airbnb</a>)</p>
<blockquote>
<p>The guest pays a service fee that's between 6 and 12% ... and the host pays a flat 3%.</p>
</blockquote>
<p>Why not just charge the guest 12 + 3 = 15%?</p>

CC BY-SA 4.0
2020-10-03T01:18:49.227Z
The profit maximizing scenario may very well be with both charged on both sides. The increase in marginal revenue from guest side by shifting the entire burden to the guest (because of positive price elasticity of demand) may very well be lower than the loss in marginal revenue from host side.
Dayne
CC BY-SA 4.0
2020-10-03T01:21:36.340Z
Now of course one might think that what we charge host gets simply added to the price. That maybe true in perfect competitive market. But many, if not most, markets have monopolistic competition or high degree of market differentiation. So charging the host will not fully be transferred to the prices, giving benefit to the guest (by decreasing effective incidence of charges) and marketplace (by higher volume of transactions). Very interesting question nevertheless. I am sure there's a game somewhere in literature to prove all this.
Dayne
CC BY-SA 4.0
2020-10-03T12:47:14.663Z
Charging both sides from the beginning gives two options for where to raise (or lower) fees in the future. Taxation may also come into this, particularly if the two sides are in two different jurisdictions.
Brian Romanchuk
<microeconomics><markets><pricing>
Why do two-sided marketplaces often charge both sides of the transaction?
dss
# Why do two-sided marketplaces often charge both sides of the transaction?

(Asked by: username_0 on 2020-10-02)

Why do marketplace apps often charge ***both*** sides of the transaction, when charging one side could raise as much (or more) revenue and be simpler?

i.e. if the marketplace knows which side of the market is less price sensitive than the other, wouldn't it make more sense to simply levy the entire fee on that side, rather than splitting it across both sides?

Example ([airbnb](https://www.econtalk.org/nathan-blecharczyk-on-airbnb-and-the-sharing-economy/))

> The guest pays a service fee that's between 6 and 12% ... and the host pays a flat 3%.

Why not just charge the guest 12 + 3 = 15%?

**Tags:** microeconomics, markets, pricing

> **Comments:**
> **username_1**: The profit maximizing scenario may very well be with both charged on both sides. The increase in marginal revenue from guest side by shifting the entire burden to the guest (because of positive price elasticity of demand) may very well be lower than the loss in marginal revenue from host side.  
> **username_1**: Now of course one might think that what we charge host gets simply added to the price. That maybe true in perfect competitive market. But many, if not most, markets have monopolistic competition or high degree of market differentiation. So charging the host will not fully be transferred to the prices, giving benefit to the guest (by decreasing effective incidence of charges) and marketplace (by higher volume of transactions). Very interesting question nevertheless. I am sure there's a game somewhere in literature to prove all this.  
> **username_2**: Charging both sides from the beginning gives two options for where to raise (or lower) fees in the future. Taxation may also come into this, particularly if the two sides are in two different jurisdictions.  

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## 0 answers

