Price Stability and Improved Buyer Utility with Presentation Design: A Theoretical Study of the Amazon Buy Box

Ophir Friedler, Hu Fu, Anna Karlin and Ariana Tang

Papers from arXiv.org

Abstract: Platforms design the form of presentation by which sellers are shown to the buyers. This design not only shapes the buyers' experience but also leads to different market equilibria or dynamics. One component in this design is through the platform's mediation of the search frictions experienced by the buyers for different sellers. We take a model of monopolistic competition and show that, on one hand, when all sellers have the same inspection costs, the market sees no stable price since the sellers always have incentives to undercut each other, and, on the other hand, the platform may stabilize the price by giving prominence to one seller chosen by a carefully designed mechanism. This calls to mind Amazon's Buy Box. We study natural mechanisms for choosing the prominent seller, characterize the range of equilibrium prices implementable by them, and find that in certain scenarios the buyers' surplus improves as the search friction increases.

Date: 2025-04
New Economics Papers: this item is included in nep-com, nep-des, nep-mic and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2504.14793 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2504.14793

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().