Hybrid Marketplaces with Free Entry of Sellers

Federico Etro ()

Review of Industrial Organization, 2023, vol. 62, issue 2, No 2, 119-148

Abstract: Abstract We study a hybrid marketplace such as Amazon that sells its own products and sets commissions on third-party sellers that engage in monopolistic competition with free entry. For a large class of microfoundations based on a representative agent, the introduction of its own products by the marketplace is neutral for consumer welfare for a given commission; but this product introduction exerts an ambiguous impact through changes of the commission. A “demand substitution mechanism” pushes for a higher commission; but an “extensive margin mechanism” pushes for a lower commission that is aimed at attracting new sellers and more purchases on the marketplace. For instance, with constant demand elasticities, a hybrid marketplace sets a lower (higher) commission rate and increases (decreases) consumer welfare compared to a pure marketplace if its products face a less (more) elastic demand.

Keywords: Hybrid marketplaces; 3P sellers; Commissions; Entry; Monopolistic competition; L1; L4 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11151-022-09893-8

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