Auctions in a Two-Sided Network: The Market for Meal Voucher Services

In two-sided networks, two parties interact on a platform, caring about the numbers of subjects on the other side. A typical problem, in this context, is setting prices for network services so as to get “both side on boards”. The standard approach in the literature considers the networks ability to convince both sides to join the network, whereas this paper consider an alternative setting, in which one side determines the price balance. This case is exemplified by the market for meal voucher services in Italy, in which one agency organizes the procurement of services for the public sector, through a competitive auction. A formal model of optimal auction is illustrated and used to assess the current procurement scheme. The model reveals that the current system is inefficient and could be improved through increased flexibility and adaptation to local economic conditions.