IDEAS home Printed from https://ideas.repec.org/p/rco/dpaper/434.html

Self-preferencing, Quality Provision, and Welfare in Mobile Application Markets

Author

Listed:
  • Xuan Teng

    (LMU Munich)

Abstract

Platforms often display their products ahead of third-party products in search. Is this due to consumers preferring platform-owned products or platforms engaging in self-preferencing by biasing search towards their own products? What are the welfare implications? I develop a structural model of mobile application markets to identify self-preferencing and quantify its welfare effects, taking into account third-party developers' quality adjustment. A new dataset on app downloads, prices, characteristics, and search rankings is used to estimate the model. Estimates indicate self-preferencing. Simulations show higher consumer welfare and third-party profits without self-preferencing.

Suggested Citation

  • Xuan Teng, 2023. "Self-preferencing, Quality Provision, and Welfare in Mobile Application Markets," Rationality and Competition Discussion Paper Series 434, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:434
    as

    Download full text from publisher

    File URL: https://rationality-and-competition.de/wp-content/uploads/discussion_paper/434.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yuxin Chen & Song Yao, 2017. "Sequential Search with Refinement: Model and Application with Click-Stream Data," Management Science, INFORMS, vol. 63(12), pages 4345-4365, December.
    2. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    3. Ying Fan & Chenyu Yang, 2025. "Estimating Discrete Games with Many Firms and Many Decisions: An Application to Merger and Product Variety," Journal of Political Economy, University of Chicago Press, vol. 133(6), pages 1886-1931.
    4. Ying Fan & Chenyu Yang, 2020. "Competition, Product Proliferation, and Welfare: A Study of the US Smartphone Market," American Economic Journal: Microeconomics, American Economic Association, vol. 12(2), pages 99-134, May.
    5. Andrei Hagiu & Tat‐How Teh & Julian Wright, 2022. "Should platforms be allowed to sell on their own marketplaces?," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 297-327, June.
    6. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    7. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    8. Beggs, S. & Cardell, S. & Hausman, J., 1981. "Assessing the potential demand for electric cars," Journal of Econometrics, Elsevier, vol. 17(1), pages 1-19, September.
    9. Sylvia Hristakeva, 2022. "Vertical Contracts with Endogenous Product Selection: An Empirical Analysis of Vendor Allowance Contracts," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3202-3252.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:ces:ceswps:_10042 is not listed on IDEAS
    2. Sébastien Houde & Wenjun Wang, 2022. "The Incidence of the U.S.-China Solar Trade War," CER-ETH Economics working paper series 22/372, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    3. Haghani, Milad & Bliemer, Michiel C.J. & Hensher, David A., 2021. "The landscape of econometric discrete choice modelling research," Journal of choice modelling, Elsevier, vol. 40(C).
    4. Brynjolfsson, Erik & Dick, Astrid Andrea & Smith, Michael D., 2004. "Search and Product Differentiation at an Internet Shopbot," Working papers 4441-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    5. Erik Brynjolfsson & Astrid Dick & Michael Smith, 2010. "A nearly perfect market?," Quantitative Marketing and Economics (QME), Springer, vol. 8(1), pages 1-33, March.
    6. Ho, Chun-Yu, 2012. "Market structure, welfare, and banking reform in China," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 291-313.
    7. Pereira, Pedro & Ribeiro, Tiago, 2011. "The impact on broadband access to the Internet of the dual ownership of telephone and cable networks," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 283-293, March.
    8. Allais, Olivier & Etilé, Fabrice & Lecocq, Sébastien, 2015. "Mandatory labels, taxes and market forces: An empirical evaluation of fat policies," Journal of Health Economics, Elsevier, vol. 43(C), pages 27-44.
    9. Dirk Bergemann & Alessandro Bonatti, 2024. "Data, Competition, and Digital Platforms," American Economic Review, American Economic Association, vol. 114(8), pages 2553-2595, August.
    10. Karle, Heiko & Schumacher, Heiner & Vølund, Rune, 2023. "Consumer loss aversion and scale-dependent psychological switching costs," Games and Economic Behavior, Elsevier, vol. 138(C), pages 214-237.
    11. Pradeep Chintagunta & Jean-Pierre Dubé & Vishal Singh, 2003. "Balancing Profitability and Customer Welfare in a Supermarket Chain," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 111-147, March.
    12. Christos Genakos & Andreas Lamprinidis & James Walker, 2023. "Evaluating merger effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(6), pages 3325-3345, September.
    13. Felix Montag, 2023. "Mergers, Foreign Competition, and Jobs: Evidence from the U.S. Appliance Industry," Rationality and Competition Discussion Paper Series 378, CRC TRR 190 Rationality and Competition.
    14. Rachel Griffith & Lars Nesheim & Martin O'Connell, 2018. "Income effects and the welfare consequences of tax in differentiated product oligopoly," Quantitative Economics, Econometric Society, vol. 9(1), pages 305-341, March.
    15. Yang, Hangjun & Ma, Wenliang & Wang, Qiang & Wang, Kun & Zhang, Yahua, 2020. "Welfare implications for air passengers in China in the era of high-speed rail," Transport Policy, Elsevier, vol. 95(C), pages 1-13.
    16. repec:ags:aaea22:343858 is not listed on IDEAS
    17. Maxim Sinitsyn, 2020. "Evaluating horizontal mergers in the presence of price promotions," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 39-60, March.
    18. Walter Beckert & Elaine Kelly, 2021. "Divided by choice? For‐profit providers, patient choice and mechanisms of patient sorting in the English National Health Service," Health Economics, John Wiley & Sons, Ltd., vol. 30(4), pages 820-839, April.
    19. Takahiko Kiso, 2019. "Evaluating New Policy Instruments of the Corporate Average Fuel Economy Standards: Footprint, Credit Transferring, and Credit Trading," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(2), pages 445-476, February.
    20. Kidokoro, Yukihiro, 2016. "A micro foundation for discrete choice models with multiple categories of goods," Journal of choice modelling, Elsevier, vol. 19(C), pages 54-72.
    21. Marc Ivaldi & Jiekai Zhang, 2017. "Advertising Competition in the Free-to-Air TV Broadcasting Industry," CESifo Working Paper Series 6461, CESifo.
    22. George Alessandria, 2005. "Consumer search, price dispersion, and international relative price volatility," Working Papers 05-9, Federal Reserve Bank of Philadelphia.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rco:dpaper:434. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Viviana Lalli (email available below). General contact details of provider: https://rationality-and-competition.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.