A prevalent market structure in the Internet economy consists of buyers and
sellers connected by a platform (such as Amazon or eBay) that acts as an
intermediary and keeps a share of the revenue of each transaction. While the
optimal mechanism that maximizes the intermediary's profit in such a setting
may be quite complicated, the mechanisms observed in reality are generally much
simpler, e.g., applying an affine function to the price of the transaction as
the intermediary's fee. Loertscher and Niedermayer [2007] initiated the study
of such fee-setting mechanisms in two-sided markets, and we continue this
investigation by addressing the question of when an affine fee schedule is
approximately optimal for worst-case seller distribution. On one hand our work
supplies non-trivial sufficient conditions on the buyer side (i.e. linearity of
marginal revenue function, or MHR property of value and value minus cost
distributions) under which an affine fee schedule can obtain a constant
fraction of the intermediary's optimal profit for all seller distributions. On
the other hand we complement our result by showing that proper affine
fee-setting mechanisms (e.g. those used in eBay and Amazon selling plans) are
unable to extract a constant fraction of optimal profit in the worst-case
seller distribution. As subsidiary results we also show there exists a constant
gap between maximum surplus and maximum revenue under the aforementioned
conditions. Most of the mechanisms that we propose are also prior-independent
with respect to the seller, which signifies the practical implications of our
result.Comment: To appear in WINE'14, the 10th conference on Web and Internet
Economic