Should Amazon Be Allowed to Sell on Its Own Marketplace?

Hagiu, Andrei; Teh, Tat‐How; Wright, Julian

doi:10.2139/ssrn.3606055

Cited by 26 publications

(24 citation statements)

References 22 publications

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“…Hagiu and Wright (2015) consider the choice between functioning as a pure marketplace or a reseller under the assumptions of a perfectly rigid demand and optimal access fees for all products, in which case the platform extracts all consumers surplus by adopting the efficient mode of distribution: we extend a similar analysis to general downward sloping demands for each product and linear commissions set by Amazon, which allows us to evaluate welfare effects in a distortive environment. Hagiu et al (2020) ask whether Amazon should be allowed to sell on its marketplace, and conclude that consumers benefit from the dual role through intensified competition on the platform, which we confirm under imperfect substitutability, but they also emphasize possible inefficiencies due to self‐preferencing and copycat products. While our static model takes as given the set of products of the sellers, Anderson and Bedre‐Defolie (2020) characterize the profit‐maximizing number of products of sellers hosted by a pure marketplace charging both listing fees and transaction fees, and compare it with the socially optimal number of products (at prices set in the market), finding that the entry of sellers may be either excessive or insufficient.…”

Section: Introductionsupporting

confidence: 73%

“…This study is related to the wide literature on platforms (Armstrong, 2006; Belleflamme & Toulemonde, 2016; De Cornière & Taylor, 2019; Gautier et al, 2021; Hagiu et al, 2020; Hervas‐Drane & Shelegia, 2021; Padilla et al, 2020; Zennyo, 2020) and in particular to important recent works on the choice of marketplaces to act as retailers. Jiang et al (2011) study dynamic entry decisions by Amazon and focus on asymmetric information on demand and effort of sellers, showing, in line with our results, that Amazon can have an incentive to commit not to imitate 3P products to foster investment while monetizing on commission revenues.…”

Section: Introductionmentioning

confidence: 93%

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Product selection in online marketplaces

Etro¹

2021

Economics Manag Strategy

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A marketplace such as Amazon hosts many products by third party sellers and acts as a first party or private label retailer. Assuming an advantage of Amazon in logistics and of sellers in marketing, we investigate whether entry by Amazon is excessive from the point of view of consumers. With competitive sellers, entry may be either overprovided or underprovided, but the incentives of Amazon and consumers are correctly aligned for a family of power surplus functions (generating for instance linear, isoelastic, and loglinear demands). Competition for customers with other retailers reduces commissions and prices preserving the efficiency result. Market power by sellers increases (reduces) the incentives to retail private label (first party) products, and generates a bias toward underprovision of entry. We extend the analysis to delivery fulfillment by the marketplace, product differentiation with price competition on the platform, and a dynamic analysis of the incentives of sellers to enter and the marketplace to launch copycat products.

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Section: Introductionsupporting

confidence: 73%

Section: Introductionmentioning

confidence: 93%

Product selection in online marketplaces

Etro¹

2021

Economics Manag Strategy

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“…For example, Hagiu and Wright (2015) and Johnson (2017) consider the platform's choice between a platform wide agency or wholesale models. By allowing the platform to enter into retail and facilitate a marketplace, our work on platform retail entry is closer to that of Etro (2020) and Hagiu et al (2020) who consider platform entry into its marketplace. However, neither Etro (2020) nor Hagiu et al (2020) consider merchant fee discrimination or category selection.…”

Section: Related Literaturementioning

confidence: 99%

The Limits of Marketplace Fee Discrimination

Tremblay

2021

SSRN Journal

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Platforms often use fee discrimination within their marketplace (e.g., Amazon, eBay, and Airbnb specify a variety of merchant fees). To better understand the impact of marketplace fee discrimination, we develop a model that allows us to determine platform equilibrium fee, category, and retail entry decisions that depend on the extent of fee discrimination available to the platform. Isolating the effects of fee discrimination (by not allowing the platform to enter into commerce), we find that greater fee discrimination allows the platform to serve more markets in its marketplace but also worsens double marginalization in the high surplus markets. However, if the platform enters into retail, then the platform reduces its fees and generates greater retail competition. These effects mitigate distortions from fee discrimination and improve welfare. In terms of policy, we show that (1) banning fee discrimination and platform entry is detrimental to welfare, (2) a vertical merger within a retail market mitigates double marginalization but is often worse than an equilibrium with platform entry into retail, and (3) taxing the platform in retail (not merchants) levels the retail playing field and can generate a Pareto improvement upon a policy that bans platform retail entry.

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“…Researchers have observed that Amazon allegedly degraded the quality of information signals to c ons umer search results to favour Amazon sales and reduce the prominence of sales by inde pend ent s ellers ("s elfpreferencing") 65 . The market-distorting effects of asymmetric information in favour of the platform o pera tor is well-documented in empirical studies on all kinds of search engines 66 .…”

Section: Negative Effects From Asymmetric Informationmentioning

confidence: 99%

An Economic Perspective on Data and Platform Market Power

Martens

2021

SSRN Journal

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This p ublication is a Technical re port by the Joint Research Ce ntre (JRC), the European Commission's science and knowledge s e rv ice . I t aims to p rovide evidence-based scientific support to the European p olicymaking process. The scientific output e xpressed d oes not imp ly a p olicy p osition of the European Commission. Neither the European Commission nor any p erson acting on behalf of th e Co mmis s ion is re sp onsible for the use that might be made of this publication. For information on the me thodology and quality underlying the data use d in this p ublication for which the source is neither Eurostat nor other Commission service s, users should contact the re ferenced source. The de signations employed and the p resentation of material on the maps do not imp ly the exp ress ion of any opinion whatsoever on the p art of the European Union concerning the le gal status of any country, territory, city or are a or of its authoritie s, or concernin g the delimitati on of its frontie rs or boundaries.

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Should Amazon Be Allowed to Sell on Its Own Marketplace?

Cited by 26 publications

References 22 publications

Product selection in online marketplaces

Product selection in online marketplaces

The Limits of Marketplace Fee Discrimination

An Economic Perspective on Data and Platform Market Power

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