Regulating Platform Bias: Self-preferencing and Transaction Fees as Strategic Substitutes

Chang-Koo Chi, Jay Pil Choi, Jong-Hee Hahn and Seongkyun Kim
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Chang-Koo Chi: Yonsei University
Jay Pil Choi: Michigan State University
Jong-Hee Hahn: Yonsei University
Seongkyun Kim: Yonsei University

No 2026rwp-294, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper studies self-preferencing incentives by vertically integrated platforms that operate both marketplaces and affiliated retail businesses. We show that self-preferencing and transaction fees are substitute instruments for profit extraction, implying that restrictions on self-preferencing may induce offsetting increases in transaction fees and thereby generate unintended consequences for consumer welfare. We characterize the platform’s optimal choice of self-preferencing and transaction fees and evaluate the welfare effects of behavioral and structural remedies. We also extend the analysis to settings with platform competition and consumer search, examining how market forces shape self-preferencing incentives and evaluating the robustness of our main results.

Keywords: self-preferencing; vertically integrated platforms; transaction fees; regulation; hierarchical Hotelling model; search (search for similar items in EconPapers)
JEL-codes: D2 D8 L2 L5 (search for similar items in EconPapers)
Pages: 44pages
Date: 2026-06
New Economics Papers: this item is included in nep-mic and nep-pay
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