The Leibniz Institute for Financial Research SAFE organizes and cordially invites you to attend the next
SAFE Digital Finance Seminar: Decentralized Pricing on Platforms
Gerry Tsoukalas (Boston University and Senior Fellow at the Wharton School of Business)
to be held on 7 February, 4:00 p.m. - 5:00 p.m. CET, via Zoom
Abstract: An open debate in platform design is who should control pricing: the platform (centralized pricing), or its service providers (decentralized pricing)? We show the key trade-off is between the regulation of competition and the facilitation of price tailoring. Centralized pricing allows the platform to control the competition that occurs among the agents but struggles with information asymmetry because platforms cannot fully observe agent costs. Decentralized pricing lets agents tailor their prices to their private costs, but without central guidance, due to agent self-interest, competition on the platform can either be too strong (prices are too low) or too weak (prices are too high). For commission-based platforms, either form of price control can prevail depending on market conditions, implying neither dominates. However, a relatively simple tweak to payments - adopting an affine fee structure based on prices posted or quantities served - allows the platform to optimally control the market in a fully decentralized manner. The benefits of affine pricing persist even in cases where the platform itself is fully disintermediated, e.g., as in many blockchain -based platforms.
Professor Tsoukalas specializes in digital platforms and analytics, and is co-founder of the Crypto and Blockchain Economics Research Forum (CBER). His scholarly work is widely published and has received numerous research awards. He holds Associate Editor positions at Management Science and M&SOM, and serves as a Guest Editor for the Journal of Operations Management. With over a decade of teaching experience, he has led undergraduate, MBA, and executive MBA courses in Business and Data Analytics (machine learning) at Boston University, Wharton, and Columbia Business School, receiving awards for teaching excellence.
He completed his undergraduate studies in France, earning degrees in applied Quantum Physics from the University of Paris and Aeronautical Engineering from the Institut Supérieur de l’Aéronautique et de l’Espace-Supaero in 2005. In the U.S., he received a Master’s in Aeronautics & Astronautics from MIT in 2007 and a PhD from the Management Science & Engineering Department at Stanford University from 2009-2013. He has published in journals like Management Science and Operations Research.
