The Simple Economics of Hybrid Marketplaces

Dryden, Neil; Khodjamirian, Sergey; Padilla, Jorge

doi:10.2139/ssrn.3650903

Cited by 8 publications

(6 citation statements)

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“…Hagiu, Teh & Wright (2020) find that platform entry constraints third-party seller pricing and might be welfare-enhancing. Similar pro-competitive effects are documented by Dryden et al (2020), Etro (2021) and Tremblay (2020). However, entry in competition with third-party sellers also opens the channel for well known negative effects such as foreclosure of rivals.…”

Section: Related Literaturesupporting

confidence: 55%

Vertical Control Change and Platform Organization Under Network Externalities

2021

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Section: Related Literaturesupporting

confidence: 55%

Vertical Control Change and Platform Organization Under Network Externalities

2021

Self Cite

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“…Based on data collected in the US, Zhu and Liu (2018) find that thirdparty sellers tend to respond to a platform's entry into the market by reducing the number of products they sell on the platform. However, based on data collected in France and Germany, Dryden et al (2020b) find an opposite result. Zhu (2019) describes these mixed results regarding platforms' market entry and suggests that more research is needed to examine third-party sellers' response to platforms' market entry.…”

Section: Introductionmentioning

confidence: 90%

Can Third-Party Sellers Benefit from a Platform’s Entry to the Market?

et al. 2023

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Because of the informational advantage of online marketplaces (i.e., platforms), it is a common belief that a platform’s market entry will be detrimental to third-party sellers who sell similar products on the platform. To examine the validity of this belief, we conduct an exploratory analysis using the sales data for a single product category provided by JD.com for the month of March 2018. Our analysis reveals an unexpected result. Upon the platform’s entry, third-party sellers who sell similar products can afford to charge a higher price, obtain a higher demand, and earn a higher profit. To provide a plausible explanation for this unexpected exploratory result, we develop a duopoly model that incorporates the changing competitive dynamic before and after the platform’s entry. Specifically, before entry, the platform earns a commission (based on the seller’s revenue), whereas the seller sets its retail price as a monopoly. After entry, the platform earns a profit generated by its direct sales in addition to the commission from the seller. In addition, the seller and the platform operate in a duopoly and engage in a sequential game. By examining the equilibrium outcomes associated with this sequential game, we identify conditions under which the platform’s entry can create a win-win situation for both parties. Specifically, these conditions hold when the platform’s market potential is moderate and when the platform’s entry creates a sufficiently high spillover effect on the seller, providing a plausible explanation for our empirical finding that the seller can benefit from a platform’s entry. Funding: W. Wang acknowledges the financial support from the National Natural Science Foundation of China [Grant 72173019], the Beijing Social Science Foundation [Grant 20JJA004], the Chinese Ministry of Education Research Funds on Humanities and Social Sciences [Grant 21YJA790056], and the Excellent Young Scholar Funds of UIBE [Grant 19YQ17].

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“…However, the platform's market power does not always harm consumers or competitors in the goods and service markets. Andrei Hagiu and Wright (2022) and Neil Dryden and Padilla (2020) discussed that dual mode operation or hybrid marketplace (i.e., platforms running marketplaces for third-party products, while selling their own products on those marketplaces) of digital platforms has a positive impact on consumer surplus and social welfare. Also, Etro (2021) argued that competition for customers with other retailers can reduce referral fees and prices preserving the efficiency result.…”

Section: Introductionmentioning

confidence: 99%

Niche Products and the Marketplace

Kim

2023

Preprint

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This paper provides a framework for analyzing the impact of a big platform's data acquisition and self-preferencing on niche firms' entry decisions with a simple two-period model. If a platform can acquire data and production cost is sufficiently low, the platform's ability to gain advantages over niche firms, which makes the platform a monopolist, influences niche firms' entry decision in several ways that depend on the size of demand given to the niche firms. Specifically, in the case of a niche firm having a small demand size, the related abilities of the platform facilitate the entry of niche firms, which is often impossible without data acquisition and self-preferencing exposures enabled by the platform. On the other hand, those abilities of the platform are a threat to the niche firms with intermediate-size demand, and thus negatively influence their entry decision. In terms of welfare, we find that those abilities of the platform can improve the consumer's surplus and total welfare by reducing the platform's common optimal referral rate for niche products, although they can harm the net profit of niche firms. JEL classification: D82, L12, L41

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The Simple Economics of Hybrid Marketplaces

Cited by 8 publications

References 0 publications

Vertical Control Change and Platform Organization Under Network Externalities

Vertical Control Change and Platform Organization Under Network Externalities

Can Third-Party Sellers Benefit from a Platform’s Entry to the Market?

Niche Products and the Marketplace

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