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Intermediated vs. Direct Sales and a No-Discrimination Rule

  • Sebastian Wismer

When sellers join a platform to sell their products, the platform operator may restrict their strategic decisions. In fact, several platform operators impose most-favored treatment or no-discrimination rules (NDRs), asking sellers not to offer better sales conditions elsewhere. In this paper, I analyze a model that allows for an endogenous split-up of consumers between sales channels. Competing sellers might set different prices across channels, depending on the platform tariff and presence of aNDR. I find that the platform operator imposes a NDR if he faces high transaction costs, if seller competition is weak, and if the initial distribution of consumers on channels is strongly skewed. Prohibiting NDRs can have both positive and negative effects on welfare.

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File URL: http://www.bgpe.de/texte/DP/131_Wismer.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 131.

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Length: 39 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:bav:wpaper:131_wismer
Contact details of provider: Web page: http://www.bgpe.de/

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  1. Bolt, Wilko & Jonker, Nicole & van Renselaar, Corry, 2010. "Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1738-1744, August.
  2. Arbatskaya, Maria, 2001. "Can low-price guarantees deter entry?," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1387-1406, November.
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  4. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
  5. Schnitzer, Monika, 1994. "Dynamic duopoly with best-price clauses," Munich Reprints in Economics 3108, University of Munich, Department of Economics.
  6. Zhu Wang & Julian Wright, 2012. "Ad-valorem platform fees and efficient price discrimination," Working Paper 12-08, Federal Reserve Bank of Richmond.
  7. Schwartz Marius & Vincent Daniel R., 2006. "The No Surcharge Rule and Card User Rebates: Vertical Control by a Payment Network," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-31, March.
  8. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  9. Miao Chun-Hui, 2014. "Do Card Users Benefit From the Use of Proportional Fees?," Review of Network Economics, De Gruyter, vol. 12(3), pages 323-341, January.
  10. Babur De Los Santos & Ali Hortacsu & Matthijs R. Wildenbeest, 2012. "Testing Models of Consumer Search Using Data on Web Browsing and Purchasing Behavior," American Economic Review, American Economic Association, vol. 102(6), pages 2955-80, October.
  11. Thomas E. Cooper, 1986. "Most-Favored-Customer Pricing and Tacit Collusion," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 377-388, Autumn.
  12. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  13. Marianne Verdier, 2011. "Interchange Fees In Payment Card Systems: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 25(2), pages 273-297, 04.
  14. Bourreau, Marc & Verdier, Marianne, 2010. "Private cards and the bypass of payment systems by merchants," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1798-1807, August.
  15. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  16. Johannes Muthers & Sebastian Wismer, 2012. "Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation," Working Papers 115, Bavarian Graduate Program in Economics (BGPE).
  17. Nicole Jonker, 2011. "Card acceptance and surcharging: the role of costs and competition," DNB Working Papers 300, Netherlands Central Bank, Research Department.
  18. repec:rje:randje:v:37:y:2006:2:p:449-465 is not listed on IDEAS
  19. Gans Joshua S & King Stephen P, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
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