Platform Disintermediation: Information Effects and Pricing Remedies

Two-sided platforms, such as labor marketplaces for hiring freelancers, typically generate revenue by matching prospective buyers and sellers and extracting commissions from completed transactions. Disintermediation, where sellers transact off-platform with buyers to bypass commission fees, can undermine the viability of these marketplaces. Although circumventing the platform allows sellers to avoid commission fees, it also leaves them fully exposed to risky buyers (given the absence of the platform’s payment protections) and incurs switching costs (given the absence of the platform’s transaction infrastructure). In this paper, we consider interventions for addressing disintermediation, focusing on the pricing and informational levers available to the platform, where the latter refers to the accuracy of the signal sellers receive about buyers’ riskiness. First, whereas intuition suggests platforms should counter disintermediation by lowering commission rates, in a high-information environment, a platform may be better off raising them. Further, when information quality is high, an increase in sellers’ switching costs may hurt platform revenue. Finally, a platform may strictly benefit from sellers receiving a partially informative buyer signal (i.e., not perfectly revealing nor concealing a buyer’s riskiness), particularly when switching costs are low. As extensions, we examine the efficacy of two interventions: implementing platform access fees to capture revenue upfront and banning sellers caught disintermediating. Overall, our results shed light on how disintermediation disrupts platform operations and offer prescriptions for platforms seeking to counteract it.

Funding: S. Sekar is supported by Natural Sciences and Engineering Research Council Discovery [Grant RGPIN-2022-04323].

Supplemental Material: All supplemental materials, including the code, data, and files required to reproduce the results, are available at https://doi.org/10.1287/opre.2025.2046.