A key issue for the design of platforms is how much discoverability to enable. Some platforms are primarily aimed at providing tools for suppliers, and offer no or limited discoverability to buyers (e.g. Shopify, Substack, ChowNow). Others are buyer-focused, offering search tools for buyers to discover the most suitable suppliers or content (Amazon, Medium, Doordash).

On February 22, Julian Wright of the National University of Singapore will discuss his study about what drives a platform’s choice between these two extremes. Enabling discoverability generates a fundamental tradeoff for platforms. On the one hand, it creates more value for buyers and helps suppliers be found by new buyers. On the other hand, it also commoditizes suppliers, by making it easier for a supplier’s a priori captive buyers to find and purchase from other suppliers. This means some suppliers may be reluctant to participate on platforms that enable too much discovery. To analyze this tradeoff, we build a model in which a platform attracts suppliers, each of whom brings some captive buyers. By its design choices (e.g. how easy it is for buyers to search and compare across suppliers), the platform determines what fraction of these buyers see other suppliers that are also participating on the platform. We find that the optimal extent of discoverability is higher when:

• suppliers’ products are less substitutable,
• the tools the platform offers to suppliers are more valuable,
• the number of potential suppliers that can be brought onto the platform is higher,
• suppliers are less asymmetric in terms of the number of buyers they bring to the platform,
• the platform brings more of its own buyers.

Moreover, the optimal extent of discoverability can be higher or lower depending on the degree of product substitutability in response to several other factors such as:

• the extent to which the platform benefits from favorable beliefs by suppliers about the participation of other suppliers,
• the extent to which buyers already know about all available sellers,
• the extent to which the platform can charge suppliers differently depending on whether transactions come from their own buyers or those obtained from other suppliers’ customers
• suppliers are able to price discriminate between their own initial captive buyers and those that they are exposed to via the platform.

This talk is part of the Digital Seminar, a D^3 Assembly series that is open to faculty, doctoral students, and academic researchers.