Consumer Fairness Concerns and Price Discrimination of Two-Sided Platforms (2026-14)

This paper studies how consumers’ concerns about fairness interact with third-degree
price discrimination of a two-sided monopoly platform. We show that the presence
of fairness concerns creates a negative demand externality from low-willingness-to-pay
to high-willingness-to-pay consumers, that is, charging less to the former reduces the
latter’s demand. With this novel externality, price-discriminating among consumers
triggers fairness concerns, which lowers consumer-side demand and ultimately restricts
the platform’s profit exploitation from the seller side. Hence, a platform whose profit
potential from sellers is larger would take consumers’ fairness concerns more seriously
and price-discriminate less. The results can explain why some major online platforms—
despite the huge profit potential of targeting prices—shy away from price discrimination
in response to consumers’ fairness concerns, while others care little about unfairness
complaints when price-discriminating among consumers.