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Intermediated vs. Direct Sales and a No-Discrimination Rule

  • Wismer, Sebastian

When sellers join a platform to sell their products, the platform operator may restrict their strategic decisions. In fact, several platform operators impose most-favored treatment or no-discrimination rules (NDRs), asking sellers not to offer better sales conditions elsewhere. In this paper, I analyze a model that allows for an endogenous split-up of consumers between sales channels. Competing sellers might set different prices across channels, depending on the platform tariff and presence of a NDR. I find that the platform operator imposes a NDR if he faces high transaction costs, if seller competition is weak, and if the initial distribution of consumers on channels is strongly skewed. Prohibiting NDRs can have both positive and negative effects on welfare.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79999.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79999
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  1. Thomas E. Cooper, 1986. "Most-Favored-Customer Pricing and Tacit Collusion," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 377-388, Autumn.
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  3. Johannes Muthers & Sebastian Wismer, 2012. "Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation," Working Papers 115, Bavarian Graduate Program in Economics (BGPE).
  4. Babur De Los Santos & Ali Hortacsu & Matthijs R. Wildenbeest, 2012. "Testing Models of Consumer Search Using Data on Web Browsing and Purchasing Behavior," American Economic Review, American Economic Association, vol. 102(6), pages 2955-80, October.
  5. Monika Schnitzer, 1994. "Dynamic Duopoly with Best-Price Clauses," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 186-196, Spring.
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  7. Bolt, Wilko & Jonker, Nicole & van Renselaar, Corry, 2010. "Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1738-1744, August.
  8. Miao Chun-Hui, 2014. "Do Card Users Benefit From the Use of Proportional Fees?," Review of Network Economics, De Gruyter, vol. 12(3), pages 323-341, January.
  9. Nicole Jonker, 2011. "Card acceptance and surcharging: the role of costs and competition," DNB Working Papers 300, Netherlands Central Bank, Research Department.
  10. Schwartz Marius & Vincent Daniel R., 2006. "The No Surcharge Rule and Card User Rebates: Vertical Control by a Payment Network," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-31, March.
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  12. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  13. Zhu Wang & Julian Wright, 2012. "Ad-valorem platform fees and efficient price discrimination," Working Paper 12-08, Federal Reserve Bank of Richmond.
  14. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  15. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
  16. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  17. Arbatskaya, Maria, 2001. "Can low-price guarantees deter entry?," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1387-1406, November.
  18. repec:rje:randje:v:37:y:2006:2:p:449-465 is not listed on IDEAS
  19. Oz Shy & Zhu Wang, 2011. "Why Do Payment Card Networks Charge Proportional Fees?," American Economic Review, American Economic Association, vol. 101(4), pages 1575-90, June.
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