Using Third-party Subsidy Program to Improve Trading Efficiency for Online Marketplaces

Online marketplaces leverage information technology to bring together buyers and sellers, with greater effectiveness at massive scales; however, online marketplaces have a larger than usual price dispersion; hence it affects the trading efficiency. A simple third- party subsidy program is presented to encourage sellers to lower their selling prices; it should therefore offset the price dispersion problem and improve the trading efficiency. Experimental results show that third-party subsidy program can indeed improve trading success rate during high price dispersion trading condition. Keywords: Online Marketplace; Quantitative Subsidy; Trading Efficiency; Trading Success Rate