Platform-Enabled Algorithmic Pricing

Shota Ichihashi ()
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Shota Ichihashi: Department of Economics, Queen's University, Kingston, ON, Canada

No 25-03, Working Papers from NET Institute

Abstract: I study a model of platform-enabled algorithmic pricing. Sellers offer identical products, to which consumers have heterogeneous values. Sellers can post a uniform price outside the platform or join the platform and delegate their pricing decision to the platform's algorithm. I show that the platform can offer a pricing algorithm to attract sellers, stifle off-platform competition, and earn a positive profit. Prohibiting the platform from using consumer data for its algorithm increases consumer surplus but decreases total surplus. A transparency requirement, which mandates the platform to share its data and algorithms with sellers, restores the first-best outcome for consumers.

Keywords: price discrimination; algorithmic pricing; competition; collusion; algorithm (search for similar items in EconPapers)
JEL-codes: D43 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2025-09
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