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First-party selling and self-preferencing

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  • Dendorfer, Florian

Abstract

In this paper, I analyze the welfare effect of a vertically integrated gatekeeper platform selling its own first-party product, i.e., first-party selling, as well as the platform's incentive to favor the first-party product in the product recommendations it makes, i.e., self-preferencing. I find that, irrespective of self-preferencing, both consumer welfare and platform revenue are higher under first-party selling because first-party selling mitigates double marginalization. Additionally, third-party product prices are lower in expected terms under first-party selling, either because the platform reduces the commission fee (with self-preferencing) or downstream competition is fiercer (without self-preferencing). Finally, I show that both consumers and the platform are better off if the platform commits not to engage in self-preferencing.

Suggested Citation

  • Dendorfer, Florian, 2024. "First-party selling and self-preferencing," International Journal of Industrial Organization, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:indorg:v:97:y:2024:i:c:s0167718724000535
    DOI: 10.1016/j.ijindorg.2024.103098
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    More about this item

    Keywords

    Double marginalization; Platform; Regulation; Self-preferencing; Steering; Vertical foreclosure; Vertical integration;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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