Self-Preferencing and Search Neutrality in Online Retail Platforms

Tianxin Zou () and Bo Zhou ()
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Tianxin Zou: Warrington College of Business, University of Florida, Gainesville, Florida 32611
Bo Zhou: Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742

Management Science, 2025, vol. 71, issue 5, 4087-4107

Abstract: Recent regulations on search neutrality prohibit retail platforms from self-preferentially prioritizing their first-party products over those of third-party sellers in consumers’ search rankings. This paper shows that, despite its good intention, search neutrality may unintendedly harm consumers and third-party sellers because of the strategic decisions of the platform and third-party sellers. In the short term, search neutrality can weaken the price competition between the platform and third-party sellers, which will hurt consumers if many of them ex ante prefer the third-party product, and can increase the platform’s profit if many consumers ex ante prefer the first-party product. In the long term, search neutrality can incentivize the platform to preempt the entry of third-party sellers if their entry cost is intermediate, further harming consumers and third-party sellers. Both unintended harms stem from two unique features of online retailing platforms: platforms personalize consumers’ search rankings, and consumers observe product prices before searching a product in depth. Alternative formulations of search neutrality, consumers’ search costs, and their product match likelihoods are considered to demonstrate the robustness of the main results.

Keywords: platform self-preferencing; platform bias; search neutrality; platform regulation; antitrust; search ranking; market entry (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:5:p:4087-4107

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