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Marketplace or reselling? A signalling model

Nada Belhadj, Didier Laussel () and Joana Resende
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Nada Belhadj: ISG - Institut Supérieur de Gestion de Tunis [Tunis] - Université de Tunis
Joana Resende: Economics Department, University of Porto

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Abstract: This paper shows that the platforms' private information on demand may explain the empirical observation that platforms like Amazon resell high-demand products, while acting as marketplace for low-demand goods. More precisely, the paper examines the strategic interaction between a seller and a better informed platform within a signalling game. We consider that the platform may choose between two distinct business models: act as a reseller or work as a pure marketplace between the buyers and the seller. The marketplace mode, which allows to internalize the spillover between the platform's sales and the seller's direct sales is always preferred for a low-value good. The reselling mode, which allows the platform to take advantage of its private information, may be selected in the case of high-value goods provided that (i) the externalities between direct sales and platform sales are not too strong and (ii) the difference between consumers' willingness to pay for the high and the low-value goods is large enough. Under these conditions, the game displays a Least-Cost Separating Equilibrium in which the platform works as a marketplace for low-demand goods, while it acts as a reseller in the case of high-demand goods.

Keywords: Marketplace; Reselling; Asymmetric information; Platform; Demand uncertainty (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-com and nep-mic
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Published in Information Economics and Policy, Elsevier, 2020, 50, pp.100834. ⟨10.1016/j.infoecopol.2019.100834⟩

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DOI: 10.1016/j.infoecopol.2019.100834

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