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Eventi del

9 2020 12:30 - 13:45
Webinar

Applied Microeconomics

Retailer-led Marketplaces


Sandro Shelegia (Universitat Pompeu Fabra)

Abstract


We study an online retailer that opens up its storefront by operating a marketplace for third party sellers. The marketplace can expand the product assortment offered on the storefront but exposes the retailer to competition. We develop a novel model of marketplace entry and price competition to analyze the interactions that arise, where third party sellers benefit from private information about the potential demand for some products but the retailer has two distinct advantages: it charges fees on the sales of marketplace sellers and controls buy box placement and search results. Our analysis reveals various non-trivial implications of fees in online marketplaces. On the one hand, lower fees increase the profitability of third-party seller entry with products that give the online retailer the possibility to earn fees and possibly sell the good itself. On the other hand, higher fees soften price competition between the retailer and sellers when they both supply the same product. We examine the implications and anticompetitive effects of marketplace fees, explain why the properties of retailer-led marketplaces contribute to soften price competition, and show how the retailer manages his own product entry choices and those of third party sellers to maximize marketplace profits. We use the model to address recent policy proposals to find that important unintended consequences may arise, often resulting in lower welfare and higher prices.

 

for further information please contact sara.picciallo@unibocconi.it