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Quality discrimination in online multi-sided markets

Nestor Duch-Brown ()
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Nestor Duch-Brown: European Commission – JRC,

Authors registered in the RePEc Author Service: Néstor Duch Brown

No 2017-06, JRC Working Papers on Digital Economy from Joint Research Centre (Seville site)

Abstract: The aim of this paper is to explain evidence of unfair practices by online platforms towards business users, particularly SME's. First, using survey data, we show that sellers operating with four different categories of platforms multi-home (marketplaces, app stores, social networks and online advertising). Hence, the appropriate competitive framework is the "competitive bottleneck" model. Second, we develop an empirical model of platform competition adding an additional dimension: service quality. The results indicate that the costs of providing quality to sellers are higher than the costs of providing quality to buyers. These differences may reflect different needs or preferences across groups. While buyers would require simple functionalities sellers would need more sophisticated services. When sellers' multi-home, platforms care more about buyers than sellers and while buyers will get an efficient level of quality, quality to sellers will be "degraded". We argue that this service quality degradation explain unfair trading practices simply because platforms are not willing to invest to take care of sellers.

Keywords: digital single market; data economy; online platforms; multi-sided markets (search for similar items in EconPapers)
JEL-codes: D23 K11 K12 L86 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ict, nep-law, nep-mkt and nep-pay
Date: 2017-12
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Handle: RePEc:ipt:decwpa:2017-06