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The Long Tail Wags the Dog: Platform Design and Bargaining with Majors

Author

Listed:
  • Gaston Llanes

  • Martin Peitz

Abstract

We study a platform that interacts with a major content provider, a long tail of independent providers, and consumers who allocate attention across competing content. By designing independent-provider compensation, the platform endoge nously shapes its outside option and disciplines the major. This strategic use of long-tail compensation distorts entry relative to the first best. Allowing the platform to steer consumer attention improves entry incentives conditional on compensation, but affects bargaining incentives, and may thus increase or de crease welfare. We then consider regulation, showing that conservative minimum compensation floors robustly improve welfare, while non-discrimination policies have ambiguous welfare effects.

Suggested Citation

  • Gaston Llanes & Martin Peitz, 2026. "The Long Tail Wags the Dog: Platform Design and Bargaining with Majors," CRC TR 224 Discussion Paper Series crctr224_2025_766, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_766
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    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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