Hybrid Marketplaces with Free Entry of Sellers

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: We study a hybrid marketplace such as Amazon selling its own products and setting commissions on sellers engaged in monopolistic competition with free entry. For a large class of microfoundations based on a representative agent, the introduction of products by the marketplace is neutral on consumer welfare for a given commission, but exerts an ambiguous impact through its changes: a "demand substitution mechanism" pushes for a higher commission, but an "extensive margin mechanism" pushes for a lower commission aimed at attracting new sellers and more purchases on the marketplace. With constant demand elasticities, a hybrid marketplace sets a lower (higher) commission rate and increases (decreases) consumer welfare compared to a pure marketplace if its products face a less (more) elastic demand. We extend the analysis to alternative timing, Bertrand competition between sellers, endogenous product selection by the marketplace, specific commissions and ads for product discovery.

Keywords: Hybrid marketplaces; 3P Sellers; Commissions; Entry; Monopolistic Competition. (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021
New Economics Papers: this item is included in nep-com, nep-cwa, nep-ind, nep-mic and nep-reg
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Citations: View citations in EconPapers (3)

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Journal Article: Hybrid Marketplaces with Free Entry of Sellers (2023)
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