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Vertical Integration and Consumer Choice: Evidence from a Field Experiment

Author

Listed:
  • Chiara Farronato
  • Andrey Fradkin
  • Alexander MacKay

Abstract

Digital platforms offer consumers vertically integrated products alongside third-party alternatives. Using a field experiment that hides Amazon brands, we quantify the impacts of vertical integration—through both the availability of private labels and their placement in search results. In their absence, consumers choose similar products with no increase in search effort or cross-platform substitution. Yet some consumers prefer Amazon brands, and removing these products reduces consumer welfare by 5.5 percent. Contrary to concerns about self-preferencing, demoting Amazon brands in search results does not increase welfare, as heterogeneous preferences make their prominent placement valuable to a meaningful share of consumers.

Suggested Citation

  • Chiara Farronato & Andrey Fradkin & Alexander MacKay, 2025. "Vertical Integration and Consumer Choice: Evidence from a Field Experiment," NBER Working Papers 34135, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34135
    Note: IO PR
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    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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