Two-sided markets

The split of prices is a strategic choice with measurable effects. Rochet and Tirole observed that platforms often treat one side as a profit center and the other as a loss leader, or at best as financially neutral. Airbnb changed its split in 2025 and 2026. Hosts had generally paid about 3% of the booking subtotal and guests a separate 14.1% to 16.5% service fee. Airbnb is moving all U.S. hosts to a single 15.5% host fee with no separate guest fee, saying it wants clearer upfront prices for guests, which it believes could help drive demand and benefit hosts.

The change shows why the split is not neutral. The whole fee now sits with hosts, who can respond by changing their listed prices. When Airbnb moved an earlier cohort of hosts, AirDNA found that about 30% raised prices enough to offset the higher fee fully and another 30% offset it partly. The platform’s choice moved the burden, and the hosts’ response determined who paid.

Cross-subsidy also makes one-sided readings of a business misleading. Judged from the merchant’s side alone, Amex looks expensive. Judged as a whole, the merchant fee pays for rewards that make cardholders choose and use the card, which is the reason merchants accept it. The Supreme Court’s holding turned on that point.

Finally, a platform lives or dies on whether both sides show up.

Platforms break when one side never reaches the level the other side needs. Windows Phone is the documented case. In October 2017 Belfiore described the loop from the inside: developers would not invest because there were too few users, and Microsoft’s payments and its own apps did not change that. The press release does not blame the app gap, so the write-down proves the business failed but not the mechanism. Belfiore’s tweet supplies the mechanism.

Repricing can misfire even when the logic is sound. Airbnb’s single fee is meant to make prices clearer to guests, and its own view is that clearer pricing helps demand. One host told CNBC he had raised his listed prices to keep guests’ total roughly the same and was seeing a slowdown in bookings, though he suspected the market had yet to settle. CNBC also reported host complaints and some hosts considering leaving. This is one host and a few forum complaints, not a measured effect. The outcome depends on whether hosts’ higher listed prices cost the platform bookings.

The label itself can be misused. Two-sided markets analysis was decisive in Ohio v. American Express, and four justices concluded that the plaintiffs had shown harm to merchants anyway. Newspapers, the Court said, do not qualify.