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Hybrid Marketplaces with Free Entry of Sellers

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  • Federico Etro

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.

Suggested Citation

  • Federico Etro, 2021. "Hybrid Marketplaces with Free Entry of Sellers," Working Papers - Economics wp2021_21.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2021_21.rdf
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    Cited by:

    1. Kittaka, Yuta & Sato, Susumu & Zennyo, Yusuke, 2023. "Self-preferencing by platforms: A literature review," Japan and the World Economy, Elsevier, vol. 66(C).
    2. Etro, Federico, 2023. "Platform competition with free entry of sellers," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    3. Anderson, Simon & Bedre-Defolie, Özlem, 2022. "Online trade platforms: Hosting, selling, or both?," International Journal of Industrial Organization, Elsevier, vol. 84(C).

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    More about this item

    Keywords

    Hybrid marketplaces; 3P Sellers; Commissions; Entry; Monopolistic Competition.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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