Product Recommendations and Price Parity Clauses

Martin Peitz () and Anton Sobolev ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: A seller can offer an experience good directly to consumers and indirectly through an intermediary. When selling indirectly, the intermediary provides recommendations based on the consumer’s match value and the prices at which the product is sold. The intermediary faces the trade-off between extracting rents from consumers who strongly care about the match value versus providing less informative recommendations but also serving consumers who do not. We analyze the allocative and welfare effects of prohibiting price parity clauses and/or regulating the intermediary’s recommender system. Prohibiting price parity clauses is always welfare decreasing in our model.

Keywords: intermediation; digital platforms; price parity; recommender system; MFN clause; e-commerce (search for similar items in EconPapers)
JEL-codes: D21 D42 L12 L15 M37 (search for similar items in EconPapers)
Pages: 64
Date: 2024-09, Revised 2024-11
New Economics Papers: this item is included in nep-com, nep-mic, nep-pay and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2024_595v2

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