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Platform-Enabled Algorithmic Pricing

Author

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  • Shota Ichihashi

    (Department of Economics, Queen's University, Kingston, ON, Canada)

Abstract

I study a model of platform-enabled algorithmic pricing. Sellers offer identical products, to which consumers have heterogeneous values. Sellers can post a uniform price outside the platform or join the platform and delegate their pricing decision to the platform's algorithm. I show that the platform can offer a pricing algorithm to attract sellers, stifle off-platform competition, and earn a positive profit. Prohibiting the platform from using consumer data for its algorithm increases consumer surplus but decreases total surplus. A transparency requirement, which mandates the platform to share its data and algorithms with sellers, restores the first-best outcome for consumers.

Suggested Citation

  • Shota Ichihashi, 2025. "Platform-Enabled Algorithmic Pricing," Working Papers 25-03, NET Institute.
    • Handle: RePEc:net:wpaper:2503
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    File URL: http://www.netinst.org/Shota_25-03.pdf
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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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