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Platform–merchant competition for sales services

Carlotta Mariotto and Marianne Verdier

Journal of Economics & Management Strategy, 2020, vol. 29, issue 4, 834-853

Abstract: In this paper, we study whether a monopolistic platform prefers to impose price parity on sellers when the latter may sell directly to consumers. The platform delivers a higher quality to consumers than the direct sales channel and may generate efficiency gains for sellers. We show that the platform imposes price parity if the degree of heterogeneity between consumers is high with respect to the quality of service on the seller side. This restriction lowers the total transaction fee paid by consumers and sellers. Consumers who buy from sellers with low transaction benefits pay a lower purchase price. The average consumer and seller surplus may either increase or decrease.

Date: 2020
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https://doi.org/10.1111/jems.12391

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