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Platform competition with free entry of sellers

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  • Etro, Federico

Abstract

We study platforms setting access prices and commissions on revenues of sellers engaged in monopolistic competition with free entry, such as the app providers on the app stores of Apple and Android devices. The link between prices on different sides induces the platforms to redistribute all the commission revenues through lower access prices and to set the optimal commission rates from the point of view of consumers, taking into account the pass-through on the prices of sellers, the elasticities of demand and surplus for their services and the elasticity of entry with respect to profitability. We discuss the role of heterogeneous sellers, substitutability between sellers’s products and limitations of the basic alignment of interest due to direct channels for sellers and consumer myopia.

Suggested Citation

  • Etro, Federico, 2023. "Platform competition with free entry of sellers," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:indorg:v:89:y:2023:i:c:s0167718722000789
    DOI: 10.1016/j.ijindorg.2022.102903
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    Cited by:

    1. Federico Etro, 2023. "Hybrid Marketplaces with Free Entry of Sellers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(2), pages 119-148, March.
    2. Huang, Yangguang & Xie, Yu, 2023. "Search algorithm, repetitive information, and sales on online platforms," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    3. Paolo Bertoletti, 2022. "A Preference-Based Model of Platform Competition," Working Papers 486, University of Milano-Bicocca, Department of Economics.

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    More about this item

    Keywords

    Digital platforms; Third-party sellers; Commissions; Entry;
    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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