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Pricing of delivery services and the emergence of marketplace platforms

Author

Listed:
  • Borsenberger, Claire
  • Cremer, Helmuth
  • Joram, Denis
  • Lozachmeur, Jean-Marie

Abstract

This paper studies the pricing of delivery services and its impact on the market structure in the-commerce sector. We focus on one of the ongoing trends, namely the development of marketplaces. A retailer may not just sell its own products; but also provide a marketplace for other sellers, offering a variety of services including delivery. Marketplaces create a "secondary" market which undermines the delivery operator's abilityto differentiate prices. We study the subgame perfect equilibrium of a sequential game with two operators where retailer 0 may potentially develop a marketplace. The delivery operator and retailer 0 bargain over the delivery rate. Then, retailer 0 chooses the per-unit rate and the fixed fee at which it is willing to sell its delivery service to the other retailer. Finally, retailer 1 chooses its delivery option: either it directly patronizes the independent delivery operator, or it uses the services offered by the marketplace, and the corresponding subgame is played. Analytical results are completed by numerical simulations and lead to three main lessons. First the equilibrium nearly always implies a discount to the "leading" retailer, even when the profit maximizing operator has all the bargaining power. Second, the delivery operator cannot avoid the emergence of a marketplace even though this decreases its profits. Third, the market power of the delivery operator cannot be assessed solely by considering its market share.

Suggested Citation

  • Borsenberger, Claire & Cremer, Helmuth & Joram, Denis & Lozachmeur, Jean-Marie, 2016. "Pricing of delivery services and the emergence of marketplace platforms," TSE Working Papers 16-686, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:30650
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    References listed on IDEAS

    as
    1. Michael Crew & Timothy J. Brennan (ed.), 2016. "The Future of the Postal Sector in a Digital World," Topics in Regulatory Economics and Policy, Springer, number 978-3-319-24454-9, March.
    2. Michael A. Crew & Timothy J. Brennan (ed.), 2015. "Postal and Delivery Innovation in the Digital Economy," Topics in Regulatory Economics and Policy, Springer, edition 127, number 978-3-319-12874-0, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    E-commerce; parcel delivery; marketplace; pricing and market structure; price discrimination;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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