Leakage happens when buyers and sellers coordinate outside the platform, usually to avoid fees. Despite platforms’ concerns about losing revenue, leakage---by its very nature---is difficult to measure and mitigate. Using geolocation data from an on-demand delivery service, we identify offline transactions that are hard to track in online marketplaces. We exploited a quasi-experiment that gradually introduced driver commissions, thereby generating variation in participants' incentives for leakage. The introduction of commissions increased leakage by nearly four percentage points, doubling disintermediated transactions we detected.

We leverage the variation in commission to estimate a structural model that quantifies the most fundamental tradeoff between platform fees and coordination costs behind leakage. The likelihood of leakage increases with the platform's quoted price in general, as the joint commission savings outweigh the joint hassle to transact offline. Our counterfactuals suggest that platforms can reduce disintermediation not only by non-fulfillment penalties (stick) but also by aligning incentives through distance-based commission discounts (carrot). We further document that allowing market participants to negotiate their own prices (decentralization) can amplify leakage among customer–driver pairs only when both parties have prior experience in cutting out the middleman. Overall, our findings provide practical guidance on designing pricing policies that sustain platform business under the threat of disintermediation.