Gatekeepers and the endogenous design of consumer preferences under personalized pricing

Rosa Branca Esteves and Nicolas Pasquier ()
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Rosa Branca Esteves: Universidade do Minho = University of Minho [Braga]
Nicolas Pasquier: UGA - Université Grenoble Alpes, GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We develop a Hotelling duopoly model of competition on a gatekeeper platform in which firms choose between uniform pricing and personalized pricing. Implementing personalized pricing requires access to a platform-provided pricing technology and entails a per-transaction fee set by the platform. The platform also designs rankings and recommendations that affect the distribution of consumers between loyal and marginal types. We show that the platform may strategically reshape the demand environment to make personalized pricing more attractive to firms and thereby raise the fee it can charge. By reallocating mass from loyal to marginal and more disloyal consumers, the platform intensifies competition under uniform pricing and relaxes firms' adoption constraint. Excessive centralization, however, erodes the rents that sustain fee extraction, so the platform chooses an interior degree of demand centralization. Relative to a no-manipulation benchmark, this reallocates surplus toward the gatekeeper and away from firms and consumers. When the platform also appropriates a share of seller profits, its incentives may reverse: it may favor loyalty-enhancing designs that soften downstream competition. The analysis highlights how platform monetization and recommendation design jointly determine downstream competition and its welfare consequences.

Keywords: Digital markets; Gatekeeper; Recommendation algorithm; Price discrimination (search for similar items in EconPapers)
Date: 2026-12
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Published in International Journal of Industrial Organization, 2026, 109, pp.103320. ⟨10.1016/j.ijindorg.2026.103320⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05720548

DOI: 10.1016/j.ijindorg.2026.103320

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