IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2504.14793.html
   My bibliography  Save this paper

Price Stability and Improved Buyer Utility with Presentation Design: A Theoretical Study of the Amazon Buy Box

Author

Listed:
  • Ophir Friedler
  • Hu Fu
  • Anna Karlin
  • Ariana Tang

Abstract

Platforms design the form of presentation by which sellers are shown to the buyers. This design not only shapes the buyers' experience but also leads to different market equilibria or dynamics. One component in this design is through the platform's mediation of the search frictions experienced by the buyers for different sellers. We take a model of monopolistic competition and show that, on one hand, when all sellers have the same inspection costs, the market sees no stable price since the sellers always have incentives to undercut each other, and, on the other hand, the platform may stabilize the price by giving prominence to one seller chosen by a carefully designed mechanism. This calls to mind Amazon's Buy Box. We study natural mechanisms for choosing the prominent seller, characterize the range of equilibrium prices implementable by them, and find that in certain scenarios the buyers' surplus improves as the search friction increases.

Suggested Citation

  • Ophir Friedler & Hu Fu & Anna Karlin & Ariana Tang, 2025. "Price Stability and Improved Buyer Utility with Presentation Design: A Theoretical Study of the Amazon Buy Box," Papers 2504.14793, arXiv.org.
    • Handle: RePEc:arx:papers:2504.14793
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2504.14793
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 107-120.
    2. Fernando Branco & Monic Sun & J. Miguel Villas-Boas, 2012. "Optimal Search for Product Information," Management Science, INFORMS, vol. 58(11), pages 2037-2056, November.
    3. Mark Armstrong & Jidong Zhou, 2022. "Consumer Information and the Limits to Competition," American Economic Review, American Economic Association, vol. 112(2), pages 534-577, February.
    4. Mark Armstrong, 2017. "Ordered Consumer Search," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 989-1024.
    5. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany.
    6. Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Prominence and consumer search," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 209-233, June.
    7. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages 368-395, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haan, Marco A. & Moraga-González, José L. & Petrikaitė, Vaiva, 2018. "A model of directed consumer search," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 223-255.
    2. Chen, Yanbin & Li, Sanxi & Lin, Kai & Yu, Jun, 2021. "Consumer search with blind buying," Games and Economic Behavior, Elsevier, vol. 126(C), pages 402-427.
    3. Makoto WATANABE & José L. Moraga-González, 2023. "Price equilibrium with selling constraints," CIGS Working Paper Series 23-012E, The Canon Institute for Global Studies.
    4. T. Tony Ke & Jiwoong Shin & Jungju Yu, 2023. "A Model of Product Portfolio Design: Guiding Consumer Search Through Brand Positioning," Marketing Science, INFORMS, vol. 42(6), pages 1101-1124, November.
    5. Charlson, G., 2021. "Rating the Competition: Seller Ratings and Intra-Platform Competition," Cambridge Working Papers in Economics 2106, Faculty of Economics, University of Cambridge.
    6. Petrikaitė, Vaiva, 2022. "Escaping search when buying," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    7. Elliott, M. & Galeotti., A. & Koh., A. & Li, W., 2021. "Market Segmentation Through Information," Cambridge Working Papers in Economics 2105, Faculty of Economics, University of Cambridge.
    8. Janssen, Aljoscha & Kasinger, Johannes, 2021. "Obfuscation and rational inattention in digitalized markets," SAFE Working Paper Series 306, Leibniz Institute for Financial Research SAFE.
    9. Janssen, Aljoscha & Kasinger, Johannes, 2021. "Obfuscation and Rational Inattention in Digitalized Markets," Working Paper Series 1379, Research Institute of Industrial Economics.
    10. Fishman, Arthur & Lubensky, Dmitry, 2018. "Search prominence and return costs," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 136-161.
    11. Florian Morath & Johannes Münster, 2018. "Online Shopping and Platform Design with Ex Ante Registration Requirements," Management Science, INFORMS, vol. 64(1), pages 360-380, January.
    12. Bian, Xueying & Fabra, Natalia, 2020. "Incentives for information provision: Energy efficiency in the Spanish rental market," Energy Economics, Elsevier, vol. 90(C).
    13. Jiwoong Shin & Jungju Yu, 2021. "Targeted Advertising and Consumer Inference," Marketing Science, INFORMS, vol. 40(5), pages 900-922, September.
    14. Chioveanu, Ioana, 2019. "Prominence, complexity, and pricing," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 551-582.
    15. Raluca M. Ursu & Daria Dzyabura, 2020. "Retailers’ product location problem with consumer search," Quantitative Marketing and Economics (QME), Springer, vol. 18(2), pages 125-154, June.
    16. Sanxi Li & Jun Yu & Mingsheng Zhang, 2024. "Search Prominence with Costly Product Returns," Papers 2410.06791, arXiv.org.
    17. Moraga-González, José-Luis & Watanabe, Makoto, 2020. "Selling Constraints," CEPR Discussion Papers 14718, C.E.P.R. Discussion Papers.
    18. Martin Obradovits & Philipp Plaickner, 2020. "Price-Directed Search and Collusion," Working Papers 2020-24, Faculty of Economics and Statistics, Universität Innsbruck.
    19. Martin Obradovits & Philipp Plaickner, 2023. "Price-Directed Search, Product Differentiation and Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(3), pages 317-348, November.
    20. Pak Hung Au & Mark Whitmeyer, 2021. "Attraction Versus Persuasion," HKUST CEP Working Papers Series 202102, HKUST Center for Economic Policy.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2504.14793. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.