Digitalization in Two-Sided Platform

In this paper we study the effects of the introduction of a new two sided platform endowed with artificial intelligence in a market where a firm provides a brick and mortar platform to buyers and sellers. In our theoretical model we show that the decision of whether to introduce the new platform depends on the reduction of the search cost for the consumers. We also show that the introduction of the platform enlarges the market with more consumers using both platforms. Finally we study the welfare effect of the introduction of the platform opening the discussion on whether certain artificial intelligence devices for shopping should be regulated.