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Hybrid Marketplaces with Free Entry of Sellers

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  • Federico Etro

Abstract

We study a hybrid marketplace such as Amazon selling its own products and setting commissions on sellers engaged in monopolistic competition with free entry. For a large class of microfoundations based on a representative agent, the introduction of products by the marketplace is neutral on consumer welfare for a given commission, but exerts an ambiguous impact through its changes: a "demand substitution mechanism" pushes for a higher commission, but an "extensive margin mechanism" pushes for a lower commission aimed at attracting new sellers and more purchases on the marketplace. With constant demand elasticities, a hybrid marketplace sets a lower (higher) commission rate and increases (decreases) consumer welfare compared to a pure marketplace if its products face a less (more) elastic demand. We extend the analysis to alternative timing, Bertrand competition between sellers, endogenous product selection by the marketplace, specific commissions and ads for product discovery.

Suggested Citation

  • Federico Etro, 2021. "Hybrid Marketplaces with Free Entry of Sellers," Working Papers - Economics wp2021_21.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2021_21.rdf
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    Cited by:

    1. Etro, Federico, 2023. "Platform competition with free entry of sellers," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    2. Anderson, Simon & Bedre-Defolie, Özlem, 2022. "Online trade platforms: Hosting, selling, or both?," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    3. Navarra, Federico & Pino, Flavio & Sandrini, Luca, 2024. "Mandated data-sharing in hybrid marketplaces," ZEW Discussion Papers 24-051, ZEW - Leibniz Centre for European Economic Research.
    4. Paolo Bertoletti & Federico Etro, 2024. "Insufficient Entry in Monopolistic Competition," Working Papers 543, University of Milano-Bicocca, Department of Economics.
    5. Kittaka, Yuta & Sato, Susumu & Zennyo, Yusuke, 2023. "Self-preferencing by platforms: A literature review," Japan and the World Economy, Elsevier, vol. 66(C).

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    More about this item

    Keywords

    Hybrid marketplaces; 3P Sellers; Commissions; Entry; Monopolistic Competition.;
    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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