Price Parity Clauses and Platform Investments

Jong-Hee Hahn and Seongkyun Kim
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Jong-Hee Hahn: Yonsei University
Seongkyun Kim: Software Policy & Research Institute

No 2026rwp-282, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper investigates the welfare effects of price parity (most-favored-nation, MFN) clauses in platform markets characterized by cross-platform investment externalities. Although price parity clauses can reduce fee competition and elevate retail prices, they may also improve efficiency by incentivizing platforms to increase demand-enhancing investments. Using a representative consumer model, we demonstrate that under conditions of substantial investment leakage and moderate marginal investment costs, the efficiency gains from enhanced investment can outweigh the negative impact of higher prices. We derive sufficient conditions under which platform profits, consumer surplus, and overall social welfare are all increased by the presence of price parity clauses. The stronger the platform competition, the greater the likelihood that price parity clauses will reduce consumer welfare.

Keywords: Price parity (MFN) clauses; Investment externalities; Antitrust; Platform (search for similar items in EconPapers)
JEL-codes: D4 D8 L1 L4 (search for similar items in EconPapers)
Pages: 29pages
Date: 2026-02
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:yon:wpaper:2026rwp-282

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