Information disclosure and pricing in the online expert service platform

Abstract

AbstractThe online expert service (OES) market is thriving by providing convenient professional services such as telemedicine consultation, legal advice, and financial planning. However, the practical phenomena, namely information asymmetry and the existence of naive consumers in the OES industry, motivate us to investigate how consumers’ two-dimensional heterogeneity and the expert’s agency pricing strategy with effort costs affect the OES platform’s information disclosure decision and corresponding market outcomes. By building a game-theoretic model, we consider the monopolistic OES platform in which the expert provides service to a mass of consumers, who can be either sophisticated or naive. The platform, as the designer of the disclosure framework, is thus an additional player in the seller-consumer game. Our results show that, when the marginal cost is intermediate, the platform strategically manipulates consumers’ valuation beliefs with partial disclosure to increase profitability without significant loss of market coverage. Furthermore, when naive consumers exist, the platform counter-intuitively discloses more information compared to that of all sophisticated consumers. Moreover, interestingly, when the marginal cost is low-to-intermediate, more naive consumers bring about more disclosure and thus obtain more demand for high-end sophisticated consumers, making both the expert and platform better off.Keywords: Online expert serviceplatforminformation disclosureagency pricinggame theory NotesDisclosure statementNo potential conflict of interest was reported by the authors.Notes1 For expositional ease, we will refer to a consumer as “he,” the expert as “she” and the OES platform as “it.”2 Statista. Telemedicine market size worldwide 2019-2030, please see https://www.statista.com/statistics/671374/global-telemedicine-market-size/.3 This assumption reflects the reality of fairly stable commission rates charged by the marketplace platforms in the OES industry today. For example, www.chunyuyisheng.com declares that a constant 20% of the platform service fee will be deducted when each expert consultation is settled since 2019.4 For ease of exposition, we refer to 1−2c and 1−λ2 as λ0 and c0, respectively.Additional informationFundingThis research was supported by the National Natural Science Foundation of China (Grant Nos. 72071193, 72293582, 71971201, 72188101, 72271078), the Fundamental Research Funds for the Central Universities (Grant No. KY2040000049). The research was also supported by National Social Science Fund of China (No. 21&ZD129) and Taishan Scholars Program of Shandong Province (No. tsqn202103024). The authors also thank the Qilu Young Scholars of Shandong University for financial support. Xuefeng Peng acknowledges the support from the China Scholarship Council.