The pricing of ancillary goods when selling on a platform

Chun-Hui Miao

International Journal of Industrial Organization, 2022, vol. 83, issue C

Abstract: Firms often sell a basic good as well as an ancillary one. When selling through platforms, they pay a fee for intermediated sales. The fee structure affects the pricing of the ancillary good. Under ad valorem fees, sellers have an incentive to shift revenue to the less taxed good. A lower fee on the ancillary good may thus increase its price. As a result, removing Apple’s App Store’s payment restrictions for in-app purchases can potentially harm consumers and lower welfare. Our analysis also shows that efficient consumption of the ancillary good is achieved under a fee or tax that increases with the elasticity of demand for the good.

Keywords: Ad valorem fee; Ancillary goods; App store; Intermediation; “Razer and blades” pricing (search for similar items in EconPapers)
JEL-codes: D40 L00 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167718722000236
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:83:y:2022:i:c:s0167718722000236

DOI: 10.1016/j.ijindorg.2022.102847

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().