We rst show that a monopoly gatekeeper sets advertising and subscription fees that are higher than the socially optimal levels. To see this, note that once the market for infonrmtion is established, all costs are such and payments for advertising and subscriptions are merely trans- fers from panicipants in the product market to the gatekeeper. Social optimality requires dint d: and x be set so as to maximize surplus in the product market. This occurs when all transac- tions in the product market take place at mar ginal cost and occur through the rnarlret for information {avoiding transactions costs of it}. Thus, social optimality requires that all consuml era subscribe (it. = 1} and purchase through the market for information at marginal cost with probability one. It follows from Proposition 3 that the socially optimal amnertising fee is I], for in this case rms advertise with certainty and price at marginal cost. Howevtn. since all rms price at marginal cost, consumers are willing to pay no more than c to participate in the market for information. Thus. socially optimal sub- scdption fees cannot exceed a. To establish that the advertising fee charged in Proposition 5 exceeds the socially optimal level. Suppose by way of contradiction that id = (l. Proposition 3 then implies titers is no price dispersion in the product market. Conse quently. consumers do not obtain any useful information about prices from the gatekeepers site; the only benet from subscribing is the elimination of the cost of physically visiting The local store. .9. It follows that act = s, since this is the highest subscription fee consisbent with n. = 1. Thus. the gatekeeper's expected raver nues are e Wl'lBll dd = 0. Suppose the gate keeper deviates by charging a tit\" slightly above zero and setting The subscription fee at K\" = app: I). Then. by part {c} of Proposition 4. there exists a dispersed price equilibrium with full consumer participation. Since price disper- sion persists when a 1 Ct, it follows that tc' :- {l as e -> 0. Thus, for sufciently small 3. the gatekeepet's expected revenues in this couilih rium are at least if > s. This contradicts the hypothesis that the gatekeeper's prots are mart- imized in an equilibrium where or = i]. We conclude that p\" :e l]. Furthermore. since qh\" :: ID implies .6 2:- s for sufciently small a. K' also exceeds the socially optimal level. Thus we have established: PROPCEITION t5: Sapporo frictions in the product monitor are negligible (2 is suicr'entiy small). in the egalitarian that Miles a mo- nopoly gatekeeper? cornered prots. the fees charged for advertising and snbscrfpn'm ex- ceed the socially optima! levels. The fact that the advertising fee set by a monopoly gatekeeper exceeds the social opti- mum impliea that rms participate in the market for information to :b 0). but at a rate that is less than the spots] optimum {at