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Private labels and platform competition

Author

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  • Saruta, Fuyuki

Abstract

This study examines the degree and manner by which first-party selling by a platform affects the profits of a third-party seller and a competing platform. After developing a model in which a third-party seller distributes goods through two competing platforms, with only one platform able to have a private label, we analyze first-party selling effects in both monopoly and duopoly platform cases. Our findings demonstrate the following. In a monopoly case, a platform consistently reduces the seller fee when introducing a private label. In a duopoly case, the two platforms will jointly raise or lower fees upon private label introduction. Additionally, first-party selling can either positively or negatively affect the competing platform's profit. Results suggest that competition among platforms might upset the influence of first-party selling on commission fees. Consequently, platforms might opt for first-party selling as a strategy to weaken commission fee competition and retail competition.

Suggested Citation

  • Saruta, Fuyuki, 2023. "Private labels and platform competition," MPRA Paper 119585, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:119585
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    First-party selling; Platform competition; Marketplaces; Agency contracts; Wholesale contracts;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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