Article

Information Gatekeepers and the Competitiveness of Homogeneous Product Markets

Authors:
To read the full-text of this research, you can request a copy directly from the authors.

Abstract

We examine the equilibrium interaction between a market for price information (controlled by a gatekeeper) and the homogenous product market it serves. The gatekeeper charges fees to firms that advertise prices on its Internet site and to consumers who access the list of advertised prices. Gatekeeper profits are maximized in an equilibrium where (a) the product market exhibits price dispersion; (b) access fees are sufficiently low that all consumers subscribe; (c) advertising fees exceed socially optimal levels, thus inducing partial firm participation; and (d) advertised prices are below unadvertised prices. Introducing the market for information has ambiguous social welfare effects.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the authors.

... This paper focuses on a particular type of platform that facilitates buyers' search for best products. While abundant papers have advanced the theory of price dispersion (Stigler, 1961;Reinganum, 1979), recent literature focuses on this topic in the context of e-commerce and platforms where search cost is reduced (Bar-Isaac et al., 2012;Baye and Morgan, 2001;Ellison and Ellison, 2009;Levin, 2011;Ellison and Wolitzky, 2012;Ellison and Ellison, 2018). Without the role of a platform, Bar-Isaac et al. (2012) studied the effect of reducing search costs on product design and the ensuing price dispersion of firms. ...
... Without the role of a platform, Bar-Isaac et al. (2012) studied the effect of reducing search costs on product design and the ensuing price dispersion of firms. In Baye and Morgan (2001), the platform can offer transparent information on low prices therefore the cost of search is zero on the platform. Other papers focuses on platform's techniques not considered in this paper, such as search obfuscation (Ellison and Ellison, 2009), ordered search engine. ...
... I do not assume cL = 0 since it is still reasonable to assume that consumers need to spend time and some effort in investigating the quality and price of each products. For the case of cL = 0, refer toBaye and Morgan (2001). ...
Article
In this thesis, I study the two-sided marketplaces with intermediaries that can facilitate matching, search and trades. ^ The first chapter considers the welfare and distributional consequences of introducing the student-proposing deferred acceptance mechanism in a model where schools have exogenous qualities and the benefit from attending a school is supermodular in school quality and student type. Unlike neighborhood assignment, deferred acceptance induces non-positive assortative matching where higher-type students do not necessarily choose neighborhoods with better schools. Student types are more heterogeneous within neighborhoods under deferred acceptance. Assuming an elastic housing supply, deferred acceptance benefits residents in lower-quality neighborhoods with more access to higher quality schools. Moreover, more parents will 'vote with their feet' for deferred acceptance, other things equal, than for neighborhood assignment. ^ The second chapter studies a search platform in a setting where buyers search for sellers directly or through a platform with lower search costs, and the platform charges both sides for the transactions it facilitates. While many intermediaries attract as many users as possible by lowering search cost, potential buyers also care about how attractive the sellers available via the intermediary are, not just the number. A search platform's strategy is determined by the coexisting positive and negative cross-group externalities: (i) while buyers appreciate more choices of sellers available on the platform, (ii) increasing the number of available sellers makes the search for low-priced and high-value sellers harder due to an unfavorable price dispersion. A platform optimally adopts a threshold strategy of targeting sellers with lower costs to balance the competing externalities. ^ The third chapter studies intermediation in a buyer-seller network with sequential bargaining. An intermediary matches traders connected in a network to bargain over the price of heterogeneous goods and has the freedom to charge each side commission. A profit-maximizing middleman can help eliminate trading delays but limits trade executed that are not surplus maximizing. When the middleman competes with the buyers and sellers being matched through an exogenous search process, she matches buyer and seller pairs that are selected less often by the exogenous search process.
... The World Health Organization (WHO) lists a number of vaccine preventable diseases, e.g., diphtheria, influenza, hepatitis A and B, measles, mumps, tetanus, poliomyelitis, rubella, and smallpox. 8 Consider poliomyelitis and the polio eradication initiative. Its existence provides clear evidence that, first, private markets fail to eradicate the disease and, second, that it seems desirable to eradicate polio internationally. ...
... This is mainly due to the low immunization rates in those countries. 9 In <level- 8 See http://www.who.int/vaccines/en/vaccprevdis.shtml. 9 "Failure to deliver at least one dose of measles vaccine to all infants remains the primary reason for high measles morbidity and mortality. ...
... The upper bound on Za is justified by normality, while 7 The way infectious diseases can spread around the world was recently demonstrated with the Severe Acute Respiratory Syndrome (SARS) that originated in China. 8 Although smallpox is said to be eradicated, there is a positive willingness to pay for vaccines. ...
... An additional complication of the scientific publication market stems from network effects that are commonplace in 'two-sided markets' (see for instance, Baye and Morgan, 2001, Caillaud and Jullien, 2003, Ellison and Fudenberg, 2003, Rochet and Tirole, 2003: Authors want to publish in journals that attract other good potential authors and therefore high interest from readers; in turn, readers want to read journals where good authors publish. This can lead to virtuous circles: Through the certification process, journals acquire reputation levels, which may make them 'unavoidable' for readers and very attractive for authors. ...
... 51 See for instance, Shy (2001), Shapiro and Varian (1998) and Dewatripont and Legros (2000). 52 See for instance Baye and Morgan (2001), Caillaud and Bruno (2003), Ellison and Fudenberg (2003). 53 Submission fees proceed from a different logic since it is a way to force the author to internalize some of the costs it imposes on the editorial board by submitting; a budget constrained author will then submit only if he faces a reasonably high probability of success. ...
... This result is consistent with the view that a zero access cost for readers should increase diffusion. It is well known that "network effects" can be more easily created when one side of the market is heavily subsidized (e.g, Baye and Morgan, 2001). This is true for the current reader-pay system by which authors do not pay for the certification service provided by the publishers; however, in this case, network effects benefit publishers who can attract a lot of authors, that is who have a large portfolio of journals. ...
... This fraction captures not only the salvage value of unsold inventories (for instance through outlet stores sales, buyback contracts with manufacturers, or future sales), but also uncommitted costs of sales and post-sales services. Our framework nests as special cases, in the limit as inventory costs become fully salvageable, several classic production-to-order models such as Bertrand with fixed costs (e.g., Anderson, Baik, and Larson, 2015) and clearinghouse models (e.g., Varian, 1980;Baye and Morgan, 2001). ...
... As inventory costs become fully variable, the equilibrium of the production-in-advance game converges to an equilibrium of the associated Bertrand game. Special cases of such games include asymmetric Bertrand models with affine costs (e.g., Marquez, 1997;Blume, 2003;Kartik, 2011;Anderson, Baik, and Larson, 2015) and clearinghouse models (e.g., Varian, 1980;Narasimhan, 1988;Baye, Kovenock, and de Vries, 1992;Baye and Morgan, 2001;Iyer, Soberman, and Villas-Boas, 2005;Kocas and Kiyak, 2006;Shelegia andWilson, 2016, 2019). It has been recognized that production-to-order games share characteristics with all-pay contests. ...
... The production-to-order literature has previously incorporated the idea that firms may need to actively decide which segments to target by adding advertising costs to Varian's model (e.g., Baye and Morgan, 2001;Iyer, Soberman, and Villas-Boas, 2005). The equilibria that were characterized already feature mass points, but have the property that no firm advertises in the contested segment with a strictly positive probability. ...
Article
We study production in advance in a setting where firms first source inventories that remain unobservable to rivals, and then simultaneously set prices. In the unique equilibrium, each firm occasionally holds a sale relative to its reference price, resulting in firms sometimes being left with unsold inventory. In the limit as inventory costs become fully recoverable, the equilibrium converges to an equilibrium of the game where firms only choose prices and produce to order—the associated Bertrand game (examples of which include fully-asymmetric clearinghouse models). Thus, away from that limit, our work generalizes Bertrand-type equilibria to production in advance, and challenges the commonly-held view associating production in advance with Cournot outcomes. The analysis involves, as an intermediate step, mapping the price-inventory game into an asymmetric all-pay contest with outside options and non-monotonic winning and losing functions. We apply our framework to public policy towards information sharing, mergers, cartels, and taxation.
... There are a series of publications on network platforms with externalities. Beginning with the analysis of monopoly markets [1,3,11,12,15], the investigations in this field were focused on platform pricing for different market structures (including the social planner's problem for proprietary platforms and associations). More specifically, the competitiveness of private platforms in different scenarios (such as single-home/multi-home and homogeneous/differentiated products), competitive bottlenecks, exclusive contracts, and some other important factors such as alternative tariffs, market demand price elasticity, transaction volumes, and buyer-seller net surplus were studied. ...
... For models (1) and (2), the agents' utilities were assumed large enough for using the service of at least one platform. For model (3), the agents were assumed to be homogeneous and only the network effect was considered. ...
Article
We study a two-sided market represented by network platforms and heterogeneous agents. Our setup departs from Armstrong (2006)’s monopoly model by assuming both (1) a continuum of agents of limited size on each side of the market and (2) heterogeneous utility of agents with Hotelling specification. We show that the monopoly’s optimal pricing strategy always results in a corner solution in terms of the equilibrium market share. We also solve for the social planner’s optimization problem and obtain a similar corner solution result. In addition, the exact values for the equilibrium in the case of duopoly for a two-sided market on two platforms are obtained.
... Our work is loosely related to the study of Internet advertising intermediaries. This line of research investigates how intermediaries allocate user traffic and price prominent locations (Baye & Morgan, 2001;Chen, Iyer, & Padmanabhan, 2002;Hagiu & Jullien, 2011;Iyer & Pazgal, 2003;Weber & Zheng, 2007;Zettelmeyer, 2000). They find that by allocating buyers only to chosen firms, the monopolistic information intermediary relaxes price competition between firms and extracts surplus (Baye & Morgan, 2001;Chen et al., 2002;Hagiu &Jullien, 2011;Iyer &Pazgal, 2003). ...
... This line of research investigates how intermediaries allocate user traffic and price prominent locations (Baye & Morgan, 2001;Chen, Iyer, & Padmanabhan, 2002;Hagiu & Jullien, 2011;Iyer & Pazgal, 2003;Weber & Zheng, 2007;Zettelmeyer, 2000). They find that by allocating buyers only to chosen firms, the monopolistic information intermediary relaxes price competition between firms and extracts surplus (Baye & Morgan, 2001;Chen et al., 2002;Hagiu &Jullien, 2011;Iyer &Pazgal, 2003). In our model, there is no monopolistic buyer allocator and firms endogenously set advertising levels in an attempt to reach consumers. ...
... Spulber (1995) shows that equilibrium price dispersion arises even when all consumers can costlessly access the clearinghouse. Baye and Morgan (2001) offer a clearinghouse model that endogenises not only the decisions of firms and consumers to utilise the information clearinghouse, but also the fees charged to consumers and firms who wish to access or transmit price information from the information gatekeeper (i.e. owner of the clearinghouse). ...
... This could be very costly for developers who are price searchers and have yet to determine an appropriate price for their new units. One may interpret this as a significant increase in firms' costs to list their products on the information clearinghouse (ØÞ: This argument largely follows Baye and Morgan's (2001) 'gatekeeper' concept where the equilibrium price dispersion is mainly driven by the costs of firms to transmit price information. If a clearinghouse sets its fees sufficiently low, all consumers will rationally access the clearinghouse to obtain information. ...
Article
Sale before completion (i.e. presale) is a common practice that real estate developers use to sell residential units. Since presale buyers are unable to inspect uncompleted units, developers may take advantage of asymmetric information and release information about quality to the market selectively. The search theory also suggests that incomplete pricing information, especially for new products, will induce a less competitive market that is characterised by dispersed presale prices. Would price dispersion be reduced if developers were required to provide more quality and pricing information? In this study, we argue that this is not necessarily the case. We conduct a natural experiment using a new information disclosure ordinance governing first-hand residential sales in the Hong Kong SAR, China. We find that the ordinance reduced the price dispersion of presale units with asymmetric information about property quality, but increased their price dispersion when limited pricing information (e.g. thin trading volume) was available in the neighbourhood. As a critical test, we further show that the ordinance increased price dispersion even more after the units were completed. This suggests that the ordinance has indeed made presale pricing more difficult because developers are no longer allowed to use different strategies to test market demand.
... Such an equilibrium may occur because dealing with both competitors would lower the value of the agency's services as they compete more fiercely. Baye and Morgan (2001) also emphasize the role of information gatekeepers on market competition by considering how they can break local monopolies. ...
... Indeed, when firms have information on each consumer, they compete more intensively, resulting in lower prices. For instance in Baye and Morgan (2001), firms end up competingàcompetingà la Bertrand, making zero profits in equilibrium. Our model shows on the contrary that a data broker has always incentives to soften competition. ...
Thesis
My PhD focuses on how information sellers use consumer information to shape competition on product markets. The three chapters develop theoretical models where the interactions between data brokers specialized in collecting and selling information, firms competing on a product market, and consumers behaving strategically regarding the price they pay and their concern for privacy. Namely we study first the strategies of data brokers selling information to competing firms allowing them to price discriminate consumers. We show that data brokers do not sell all information about consumers but keep a share of unidentified consumers instead. We focus then on competition and mergers between data brokers, and we show that competition affects the uses of information in several directions. Competing data brokers collect less information than monopolists, but sell more consumer data. We show that consumers benefit from competition between data brokers regarding the price they pay on the product market, but the effects on their privacy are two fold. Finally we consider the reactions of consumers who can hide from data brokers and pay a homogeneous price. We show that in order to moderate consumers' willingness to hide, data brokers will identify more consumers on the product market and thus increase competition between firms. Thus the possibility to hide positively affects consumers on the price they pay, as competition is increased, but as more consumers are identified, their privacy concern increases. Overall, this study answers some key questions on the mechanisms of information collection, and uses by data brokers, how they affect competition on the product market, and how consumers react to it when they are concerned both by the price they pay and by their privacy.
... Researchers use the mixedstrategy equilibrium to rationalize spatial price dispersion (different prices at the same time) and the temporal price dispersion (price fluctuations over time). To prevent all consumers from flocking to the market with the lowest price, the literature on one-dimensional price competition assumes frictions for consumers to obtain the prices (Rosenthal 1980;Varian 1980;Burdett and Judd 1983) or assumes frictions for firms to advertise their prices (Butters 1977;Baye and Morgan 2001). Our model does not include such market frictions, and a pure-strategy equilibrium does not exists, because prices cannot be uniquely ranked in a two-dimensional space. ...
... 12 Proposition 4 (Mixed-strategy equilibrium). Under the tick size constraints in Equation (1) The driver of our mixed-strategy equilibrium significantly differs from those in the canonical one-dimensional mixed-strategy equilibrium, which generally involves frictions that prevent customers from finding the best price (Rosenthal 1980;Varian 1980;Burdett and Judd 1983), or cost for firms to advertise their prices (Butters 1977;Baye and Morgan 2001). Without these frictions, firms with the lowest price would attract all customers. ...
Article
Stock exchange operators compete for order flow by setting “make” fees for limit orders and “take” fees for market orders. When traders can quote continuous prices, exchange operators compete on total fee, because traders can choose prices that perfectly neutralize any fee division. The 1-cent minimum tick size, however, prevents traders from neutralizing fee division. The nonneutrality of division between make and take fees (1) allows an exchange operator to establish exchanges that differ in fee structure to engage in second-degree price discrimination and (2) destroys the Bertrand equilibrium, leads to frequent fee changes, and encourages entries of new exchanges. Received May 29, 2016; editorial decision April 19, 2018 by Editor Robin Greenwood. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
... The closest paper to ours is Baye and Morgan (2001). The authors develop a model where traditional retailers are local monopolists in their home market and can decide to enter the online market via a marketplace (the 'gatekeeper'), charging uniform prices across channels. ...
... The authors develop a model where traditional retailers are local monopolists in their home market and can decide to enter the online market via a marketplace (the 'gatekeeper'), charging uniform prices across channels. Baye and Morgan (2001) study the marketplace's pricing strategy vis-a-vis local firms and consumers, as well as retailers' pricing strategy. However, in our setting, multi-channel retailers operate an online store and do not need access to an intermediary to sell to online shoppers. ...
Article
Full-text available
We develop a model of strategic geoblocking, where two competing multi-channel retailers, located in different countries, can decide to block access to their online store from foreign consumers. We characterize the equilibrium when firms decide unilaterally whether to introduce geoblocking restrictions. We show that geoblocking results in a “puppy dog” strategy (Fudenberg and Tirole, 1984) for firms, which allows them to soften competition, but that it comes at the cost of lower demand. In the short term, a ban on geoblocking leads to lower prices, both offline and online. However, in the longer term, when firms can invest in increasing the demand from online shoppers, the ban may have adverse effects on investment and social welfare. We extend our analysis to account for price discrimination and investigate the role of shipping costs.
... There are a series of publications on network platforms with externalities. Beginning with the analysis of monopoly markets [1,3,11,12,15], the investigations in this field were focused on platform pricing for different market structures (including the social planner's problem for proprietary platforms and associations). More specifically, the competitiveness of private platforms in different scenarios (such as single-home/multi-home and homogeneous/differentiated products), competitive bottlenecks, exclusive contracts, and some other important factors such as alternative tariffs, market demand price elasticity, transaction volumes, and buyer-seller net surplus were studied. ...
... For models (1) and (2), the agents' utilities were assumed large enough for using the service of at least one platform. For model (3), the agents were assumed to be homogeneous and only the network effect was considered. ...
Article
This paper studies equilibrium in a two-sided market represented by network platforms and heterogeneous agents. The setup below is based on the Armstrong monopoly model suggested in 2006 under the following assumptions: (1) a continuum of agents of limited size on each side of the market and (2) the heterogeneous utility of agents with the Hotelling specification. We show that the monopoly’s optimal pricing strategy always results in a corner solution in terms of the equilibrium market share. In addition, we solve the social planner’s optimization problem, obtaining a similar corner solution. Finally, we find the exact values for the equilibrium in the case of duopoly in a two-sided market with two platforms.
... To explore this, we introduce an upstream monopoly supplier into a clearinghouse-style model where retailers can advertise their price to consumers (e.g. Baye and Morgan, 2001). We show how the double marginalisation problem exists in equilibrium when retailers' advertising expenditure is positive despite the supplier offering a two-part tariff. ...
... At a retail price, p, each consumer demands q (p) = max v p b , 0 units, where v > c and b > 0. Consumers are uninformed about the supplier's twopart tariff and any retail prices that are not advertised. Consistent with Baye and Morgan (2001), we assume consumers behave as follows. If one or more retailers advertise a price (weakly) ...
Article
The developing literature on consumer information and vertical relations has yet to consider information provision via costly retail price advertising. By exploring this, we show that the double marginalisation problem exists in equilibrium despite an upstream supplier offering a two-part tariff. Intuitively, the supplier elicits higher retail prices to strategically reduce retailers’ advertising expenditure in order to extract additional rents. We then demonstrate how vertical restraints, such as resale price maintenance, can increase supply-chain profits and consumer welfare by lowering retail prices despite paradoxically discouraging price advertising.
... Price comparison websites give customers easier access to price information, such as Skyscanner. With online retailing growing substantially, particularly with the emergence of online price comparison websites, customer research costs have been reduced significantly, which has resulted in minimal costs to compare prices of different hotels (Baye & Morgan, 2001). Customers' ability to search and compare prices instantaneously reduces information search cost, leading to information asymmetry being mitigated in the market due to price transparency (Soh et al., 2006). ...
... This implies that with a growing number of informed consumers, an online marketplace becomes more price competitive, and thus, price dispersion among etrailers would be narrower than conventional offline retailers (Jiang, 2002). Despite price dispersion being less pronounced within the online marketplace, it cannot completely disappear, despite reducing search costs and increasing information transparency within an online marketplace (Baye & Morgan, 2001). ...
... As a consequence, we can recover Bertrand's setup within Varian's model by assuming that, when 9. Temporal price dispersion seemingly happens in a wide range of contexts, from sales in retail markets to life insurance industry and Internet price comparison websites. See Baye and Morgan (2001) and Baye, Morgan, and Scholten (2006). information costs are zero, all costumers become informed, i.e., U is zero. ...
... . SeeBaye and Morgan (2001),Baye, Morgan, and Scholten (2006), andShelegia and Wilson (2021). These authors show that equilibrium price dispersion arises -provided that advertising costs are not too large that firms refuse to list prices at the clearinghouse. ...
Article
This paper defends the viability of de-idealization strategies in economic modeling against recent criticism. De-idealization occurs when an idealized assumption of a theoretical model is replaced with a more realistic one. Recently, some scholars have raised objections against the possibility or fruitfulness of de-idealizing economic models, suggesting that economists do not employ this kind of strategy. We present a detailed case study from the theory of industrial organization, discussing three different models, two of which can be construed as de-idealized versions of the first (the so-called Bertrand model of oligopoly). We conclude that recent pessimism about de-idealization in economics is largely unfounded, and that de-idealization strategies are not only possible but also widely employed in economics.
... 11 Our paper also contributes to work on price comparison websites. Baye and Morgan (2001) show how homogeneous sellers obtain positive profits, even if a website informs buyers about all prices. Sellers still cater to their local market, in which buyers are not informed about all prices. ...
... The structure and magnitude of such fees affect the market outcome to a great extent. In a theoretical work, Baye and Morgan (2001) focus on this question, analysing the way gatekeepers' fee decision in an electronic market impact (and is impacted by) the competitiveness of the overall product market. In their model, there are two local markets of a homogeneous good, each served by a monopolistic firm. ...
... Some earlier works have considered intermediation when consumers can either buy through the intermediary or directly from firms. For example, Baye and Morgan (2001) and Galeotti and Moraga-González (2009) allow consumers to bypass the intermediary, in which case consumers are assumed to face a single (i.e. monopoly) seller. ...
Article
When consumers rely on an intermediary's advice about which firm to buy from but can switch to buying directly after receiving advice, one might expect firms to discount their direct prices to encourage consumers to purchase directly after obtaining advice, thereby avoiding paying commissions. We provide a theory which can explain why firms often do not free ride in this way, as well as when they do. The theory can explain why online marketplaces and hotel booking platforms impose price-parity clauses to prevent such free riding, while insurance and financial advisors do not.
... While previous empirical work has demonstrated mixed findings with regard to the degree of price dispersion, the incidence of price dispersion itself is persistent across many different products and services available online (e.g., Ancarani and Shankar 2004;Sengupta and Wiggins 2014). Online price dispersion may be less pronounced within an online marketplace but it cannot disappear, even in spite of an increase in information transparency and the reduced search cost within an online marketplace (Baye and Morgan 2001). ...
Article
Full-text available
This research investigates the impact of different degrees of price dispersion on travelers’ hotel choice. More specifically, within an online travel agency (OTA) context, we examine the effect of wide (vs. narrow) price dispersion on hotel preference. In addition, we suggest two boundary conditions for this effect: salience of external regular price and perception of destination uncertainty. Across multiple studies, our results show that travelers prefer a hotel option featuring wide price dominance dispersion. Additionally, both the presence of an external regular price and the level of uncertainty associated with the hotel destination act as moderating influences. This work represents an emerging direction in the online price dispersion literature, namely, exploring the consequences of online price dispersion. In practice, by understanding the influence of price dispersion on consumer choice, OTAs can develop more effective pricing strategies in partnership with their hotel room suppliers.
... Große Händler, die ihre Produkte sowohl online als auch über traditionelle Kanäle vertreiben, genießen oft logistische Vorteile, höheresKundenvertrauen (Smith -Brynjolfsson, 2001) und werden mit höherer Servicequalität assoziiert(Pan -Ratchford -Shankar, 2002. Wenn Shopbots 21 ) als Informationsregulatoren fungieren, indem Händler Gebühren zahlen müssen, um gelistet zu werden, kann dies ebenfalls Preisdispersion erklären(Baye -Morgan, 2001). Allerdings ist auch der Markt von Shopbots nicht monopolis- tisch strukturiert und die Auswirkungen von Wettbewerb zwischen verschiedenen Shopbot- Anbietern sind unklar (siehe zweiseitige Märkte). ...
Research
Full-text available
Digitale Technologien stellen bestehende Marktmechanismen, wirtschaftspolitische Instrumente, Strukturen sowie ökonomische und soziale Interaktionen grundlegend in Frage. Während auf traditionellen Märkten den Preisen von Gütern und Dienstleistungen die zentrale Allokationsfunktion zukommt, wird der Konnex zwischen Preis und Wert in der datengetriebenen Ökonomie weitgehend aufgelöst. Die Ursache dafür liegt in der spezifischen Kostenstruktur, die durch hohe Fixkosten bei gleichzeitig äußert niedrigen Grenzkosten (nahe Null) gekennzeichnet ist. Diese Kostenstruktur begünstigt die monetär (fast) kostenlose Skalierung digitaler Produkte und Dienstleistungen auf Plattformmärkten". In der digitalen Ökonomie bildet die Verfügungsmacht über Daten den entscheidenden Wettbewerbsfaktor. Im Extremfall entstehen daraus (natürliche) Monopole. Auf der Grundlage von sechs Themenfeldanalysen (Makroökonomie, Öffentlicher Sektor, Wettbewerb, Raum, Soziale Sicherheit, Umwelt und Energie) werden die Erkenntnisse zu drei Metahypothesen verdichtet, die den Handlungsspielraum zur optimalen Nutzung der Vorteile der Digitalisierung für Wirtschaftswachstum, Beschäftigung und Wohlstand abstecken: 1. Die "neue" Ökonomie ist eine Ökonomie digitaler Daten ("Digitalismus"). 2. Vorhandene Strukturen brechen auf ("Strukturbruch"). 3. Neue Strukturen manifestieren sich in Extremen ("Polarisierung").
... towards vertically related (upstream or downstream) companies may surface already way below traditional market power positions and the superior bargaining power of the gatekeeper platforms may allow for exploitative abuses towards (upstream or downstream) economic-dependent firms (Baye & Morgan 2001;Bougette et al. 2017;Dinerstein et al. 2018). ...
... In modelling the platform's role in facilitating search, our article is also related to the literature modelling price comparison websites (PCWs). The seminal model of a PCW is Baye and Morgan (2001), in which consumers can use a PCW to find the lowest priced seller or go to their local monopolist. Extending Baye and Morgan's framework to a setting where firms offer horizontally differentiated products, Galeotti and Moraga-González (2009) and Moraga-González and Wildenbeest (2012) find that requiring prices be the same on the PCW as in the direct market does not harm consumers, which reflects that the PCW is assumed to only use fixed fees. ...
Article
We provide a model in which consumers search for firms directly or through platforms. Platforms lower search costs but charge firms for the transactions they facilitate. Platform fees raise the possibility of showrooming, in which consumers search on a platform but then switch and buy directly to take advantage of lower direct prices. In settings like this, search platforms like Booking.com have adopted price parity clauses, requiring firms to offer their best prices on the platform, arguing this is needed to prevent showrooming. However, despite allowing for showrooming in our model, we find that price parity clauses often harm consumers.
... Research has shown that if customers learn about the shipping options after incurring the search cost, they become less sensitive to the shipping price (Dinlersoz and Li 2006). Driven by this fact, several studies have proposed strategies to mitigate consumer price sensitivity by hiding or delaying valuable information to lock customers in to a purchase (Baye and Morgan 2001, Ellison and Ellison 2009, Moon et al. 2018. However, such strategies may lead to negative outcomes because the lack of availability of shipping information in early stages is one of the main reasons why consumers abandon their shopping carts. ...
Preprint
Full-text available
Online retailers have to provide customers with an estimate of how fast an order can be delivered before they purchase it. This delivery speed promise is what online retailers can strategically adjust at almost no cost but what may fundamentally impact business outcomes. It influences consumers' purchasing decisions and post-purchase experiences, often in the opposite direction. On one hand, an aggressive (i.e., faster) delivery estimate could assure more customers of meeting their deadlines and thus may increase their purchases ex-ante. On the other hand, an aggressive estimate tends to overpromise customers, risking a longer than expected wait time, which can lower customer satisfaction and increase product returns ex-post. In this research, we study the causal effect of retailers' delivery speed promise on customer behaviors and business performance. Collaborating with Collage.com, an online retailer that sells customized photo products, we co-designed its new shipping policy. We exogenously varied the disclosed delivery speed estimates across cities while keeping the physical delivery speed unchanged. Using a difference-indifferences identification and a dataset with 212,340 transactions in 7,090 cities, we find that a one-day faster promise increases sales by 0.73%, profits by 2.0%, and value per order by 3.5%; a one-day slower promise reduces sales by 0.51%, profits by 2.7%, and value per order by 3.1%. However, the aggressive disclosure increases product returns. Retailers could leverage our insights to customize delivery promises for certain products or customers.
... A number of papers have been published on network platforms with externalities. Since the analysis of monopolistic markets [3][4][5][6][7], studies in this sphere have been focused on the pricing platforms for markets with different structures, including the problem of the social optimum for private platforms and associations. The aspects addressed were the models of private platforms' competition in different scenarios for homogeneous and differentiated products, bottlenecks, exclusive contracts, as well as the effects of various important factors such as tariffs, market price elasticity, transaction size, and buyers and sellers net surplus. ...
Article
Full-text available
Equilibrium in a two-sided market represented by network platforms on the plane and heterogeneous agents is investigated. The advocated approach is based on the duopoly model which implies a continuum of agents of limited size on each side of the market and examines the agents’ heterogeneous utility with the Hotelling specification. The exact values were found for the equilibrium in the case of duopoly in a two-sided market with two platforms on the plane. The dependence of the platforms’ benefits on network externalities was investigated. The problem of the optimal location of platforms in the market was considered.
... By focusing on a government-initiated comparison site, this article contributes to the growing literature on the role of comparison sites and competitive channels in at least two ways. First, the literature on comparison sites and competitive channels, such as Baye and Morgan (2001), Bodur et al. (2016). Moraga-González and Wildenbeest (2008), Ronayne and Taylor (2018), and Ronayn (2019), has mainly been interested in the role of commercial comparison sites, where the site operator charges fees to firms who advertise and to consumers who use it. ...
Article
Full-text available
We conduct an online randomized controlled experiment in Australia in order to examine whether government initiatives to encourage the use of energy comparison sites increase consumer search and result in lower prices. Despite significant price variations across energy retailers, our experiment indicates that while providing information about the potential gains from using the government-owned Victoria Energy Compare (VEC) website encourages participants to visit the website, it is not effective in inducing them to contact, or switch, retailers who are providing better offers. Moreover, low-income individuals who visited the VEC website due to the availability of a $50 bonus are less likely to contact retailers for a better deal in order to switch retailers, and end up paying a higher cost of per unit kWh electricity and spending more on total electricity expenditure. Our findings imply that promoting government-initiated comparison sites is not sufficient to increase competition and that providing consumers with financial incentives for using these sites in order to encourage competition and improve outcomes of the energy poor may potentially backfire.
... Przyjmują one formę porównywarek ceno wych [Małachowski 2005, s. 179], które generują sumaryczną ofertę różnorodnych sprzedawców (por. [Baye, Morgan 2007]). W praktyce zapewnia to większą przej rzystość rynków internetowych [Forlicz 2002, s. 8-9], obniżając koszty odkrywania cen. ...
Book
Full-text available
Przeciętnemu użytkownikowi Internet jawi się jako źródło nieprzebranych informacji, licznych udogodnień i aplikacji oraz ogromnych zasobów treści rozrywkowych. Co dzień miliardy ludzi korzysta z dobrodziejstw Internetu, nie zastanawiając się nad tym, że większość z jego zasobów, dostarczanych jako produkty wirtualne, jest nieodpłatna. Wartościowe produkty wirtualne są dostarczane przy cenach zerowych, co stoi w sprzeczności z zasadą gospodarowania. Z ekonomicznego punktu widzenia jest to paradoks. Niniejsza książka jest próbą jego wyjaśnienia na kanwie trzech programów badawczych: ekonomii neoklasycznej, ekonomii kosztów transakcyjnych i teorii wymiany społecznej. Prowadzone tu rozważania mają zarówno charakter praktyczny, ukazując strategie biznesowe przedsiębiorców udostępniających nieodpłatnie produkty wirtualne, jak i teoretyczny, dotyczący możliwości eksplanacyjnych poszczególnych programów badawczych.
... Closely related to the incentives at work in this industry, Baye and Morgan (2001) theoretically show that in a homogeneous product market, an aggregator has incentives to gain full consumer participation but keep firm participation partial. This is because when all firms participate, prices drop to marginal costs, removing incentives for the firm to pay a fee to the aggregator or for the consumer to use the aggregator's site. ...
Article
Full-text available
Aggregators are facing increased scrutiny by regulatory authorities, suggesting these sites have considerable market power. On the other extreme, firms are bypassing aggregators, choosing instead to sell directly to consumers. This raises the question as to which party has more market power: the aggregator or the individual firm. Focusing on the airline industry, we investigate who benefits most in the airline-aggregator relationship. Specifically, we ask what would happen to airline and aggregator site visits and purchases in the absence of a comprehensive aggregator. We first explore consumers’ search patterns on Southwest, an airline that has never been part of any aggregator. In a descriptive exercise, we find that consumers who book on Southwest are the least likely to visit aggregator sites. Second, we use the 2011 American dispute with Orbitz as an exogenous event, which led to American fares no longer being displayed on Orbitz for five months. We use this dispute to identify who was hurt the most—the aggregator or the airline—in the months following the dispute. Our findings indicate the aggregator loses the most when it is not comprehensive.
... Still, theoretical models suggest that when buyers award sizable market shares to the lowest bidders, reverse auctions should stimulate strong price competition. [418][419][420][421][422] Moreover, the degree of risk aversion may differ between companies. For example, large-size firms which produce many products may be more willing to take risks than small and medium-size ones, given that firms prepare bids based on their medicine portfolios (ie, joint probability of winning a number of contracts, rather than any one contract). ...
Thesis
Full-text available
Background and importance: Rising drug prices are putting pressure on health care budgets. Policymakers are assessing how they can save money through generic drugs. Objective: The aim of this Ph.D. was to explore issues relating to the prices and usage of generic medicines in high- and middle-income countries in five articles. This was done using quantitative and qualitative methods, including price and Herfindahl-Hirschman indexes, difference-in-differences regression analyses, semi-structured stakeholder interviews, and literature reviews. As a Ph.D. “thesis by papers”, each of the five articles should be read as a stand-alone piece. However, the thesis presents an overarching narrative, outlined at the end of Chapter 1. Novelty and empirical contribution: My original contributions to knowledge are: (i) updated analyses of generic drug policies, prices, and usage rates in high-income countries, based on a large, representative sample of generic medicines from 2013 (Chapters 2 and 3); (ii) evidence on the impact of a pharmaceutical tendering system on medicines prices, demand, and competition over a 15-year period (Chapter 4); (iii) quantitative data on the impact of therapeutic tendering on drug spending and prices (Chapter 5); and (iv) qualitative data on how a country can move from a fragmented health-care system to a single-payer one, using tendering as the basis for a comprehensive drug-benefit plan (Chapter 6). Key findings: The prices and market shares of generics varied widely across Europe. For example, prices charged by manufacturers in Switzerland were, on average, more than 2.5 times those in Germany and more than 6 times those in the United Kingdom, based on the results of a commonly used price index. However, the results varied depending on the choice of index, base country, unit of volume, method of currency conversion, and therapeutic category. The results also differed depending on whether one looked at the prices charged by manufacturers or those charged by pharmacists. The proportion of prescriptions filled with generics ranged from 17% in Switzerland to 83% in the United Kingdom. The results of the first two studies indicated that the countries which used tender or tender-like systems to set generic drug prices in retail pharmacies (ie, Denmark, Germany, the Netherlands, and Sweden) had among the lowest prices among the countries included in the studies. Tendering can be an effective policy to procure essential medicines at low prices, based on analysis of data from South Africa and Cyprus. For instance, the average prices of antiretroviral therapies, anti-infective medicines, small-volume parenterals, drops and inhalers, solid-dose medicines, and family-planning agents dropped by roughly 40% or more between 2003 and 2016 in South Africa. Many tender contracts in South Africa remained competitive over time, based on the Herfindahl-Hirschman results, with some notable exceptions. However, the number of different firms winning contracts decreased over time in most tender categories. Also, there were large discrepancies between the drug quantities the health ministry estimated it would need to meet patient demand and the quantities the ministry went on to procure during tender periods. In South Africa, the introduction of therapeutic tendering was associated with an estimated 33% to 44% reduction in the prices of solid-dose drugs in 2014. National governments in countries aiming to introduce national health systems (eg, Cyprus and South Africa) will need to adapt their tendering systems and other pharmaceutical policies during transition periods. Future research directions: More research is needed to better understand the drivers of differences in generic drug prices between countries. It is also important to examine why there are large differences in the prices of drugs in various therapeutic areas, both within and between countries. Also, data from more countries, especially low- and middle-income ones, are needed to determine which features of tendering systems are associated with lower prices. Future studies should re-examine the South African therapeutic tendering system once data from more post-intervention periods are available, possibly using other research designs like interrupted time-series models (ie, segmented regression analysis). Policy implications: Price indexes are useful statistical approaches for comparing drug prices across countries, but policymakers should interpret price indexes with caution given their limitations. This thesis offers useful data for policymakers using, or planning to introduce, tendering systems, especially in countries aiming for universal health coverage, like Cyprus (Chapter 6) and South Africa (Chapters 4 and 5).
... A special case is ρ = 1/2, as in this caseũ(n s ) is constant in n s ; this describes a situation in which seller competition generates a negative within-group external effect, whereas seller competition has no effect on a consumer's per-seller gross benefit. 5 Another example, in which sellers compete on a Salop circle, can be found in Lin, Wu and Zhou (2016). 6 We suppose here that there is a finite number of discrete sellers and then ignore the integer constrains. ...
Article
Full-text available
On many two‐sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition affects platform pricing, product variety, and the number of platforms that carry trade.
... Our game-theoretical model is similar to previously developed models where a subset of consumers obtain information on the entire distribution of market prices from an "information clearinghouse" (Baye et al., 2006), which can be a newspaper or a price-comparison website, and purchase at the lowest listed price. Varian (1980), Baye and Morgan (2001), and Baye and Morgan (2009) are some examples of studies from the body of literature that incorporate an information clearinghouse into their models. These studies, however, assume homogeneous costs. ...
... 10 As defined in equation (4), e i depends on θ i , although the probability Pr (π F ≥ 0) does not affect the second term in platform profits. The implied assumption is that users buy 8 Following Baye and Morgan (2001), the platform does not charge users but only charges firms. 9 Following studies on ad-blocking technologies (Anderson andGans 2011, Shiller et al. 2018), we model VCS as a potential revenue enhancer revealing additional valuable information about user preference and behaviour. ...
Article
Full-text available
This paper models how internet platforms decide whether to introduce virtual currencies. Since platforms operate two-sided markets, virtual currencies may attract users who buy goods/services as well as external firms who accept virtual currency as payment. We find that platform incentives to introduce virtual currencies depend on the distribution of wages across the population of users as well as the distribution of preferences for online activities ("digital" preferences). We use Luxembourg data from the EU Survey on Information and Communication Technologies to test model predictions on user time allocation. In particular, we identify various individual socioeconomic characteristics linked to time spent on social networks. Then, we use the user net income distribution (conditional on digital preferences) to evaluate conditions determining the platform's choice of virtual currency design.
... 1) This paper deals with periodic price reduction as a tool to discriminate the price offered to either loyal or non-loyal consumers. In many studies dealing with loyalty or information (e.g., Varian 1980Varian , 1981Narasiman 1988;Raju, Srinivasan, and Ral 1990;Baye and Morgan 2001), the main concern is competition focused on non-loyal or informed consumers, and they viewed periodic price reduction as a result of mixed strategy equilibrium. 2) When rivals offer promotional price reduction, firms want to offer the regular price to secure a higher margin from loyal consumers. ...
... Third, we lay out a research agenda to further develop the field. Fourth, the unique characteristics of energy, namely, that it is homogenous and intangible (Baye and Morgan, 2001) and that it can be classified as a credence good (Emons, 1997), offer a new perspective on platform economics research in general. ...
Article
Purpose This paper aims to present a conceptual framework for the emerging field of green energy platform economics. Design/methodology/approach The authors develop a conceptual framework based on a careful review of the existing literature, and research into the current provider landscape and insights from academic and industry experts. The authors also examine the implications for the energy sector’s value chain and derive a research agenda based on those areas where research still needs to be pursued. Findings The framework combines the spatial characteristics of platform models (residential/mobile) with the different types of platform business model (B2C/C2C/C2Grid). Using this framework, the authors illustrate how green energy platforms can fundamentally disrupt the conventional electricity value chain by enabling prosumers to market their assets, creating new arenas for trading and collaboration, and by increasing transparency and competition in the sector. The authors also identify areas where more research is required, particularly empirical studies into energy forms other than electricity and analyses of currently underrepresented aspects such as user interfaces and social interactions. Social implications Green energy platforms have the potential to contribute meaningfully to the energy sector’s decarbonization, digitalization and decentralization, and hence to the deceleration of climate change. Originality/value This paper is among the first to provide a holistic perspective on platformization in the energy sector. It also offers a new perspective on platform economics in general that is based on the unique characteristics of energy as an economic good (intangibility, homogeneity, credence good).
... Stigler, 1961;Rothschild, 1973;Reinganum, 1979;MacMinn, 1980) and clearinghouse models (e.g. Varian, 1980;Salop and Stiglitz, 1977;Shilony, 1977;Rosenthal, 1980;Narasimhan, 1988;Spulber, 1995;Baye and Morgan, 2001;Baye, Morgan and Scholten, 2006). In search-theoretic models, price dispersion arises from the marginal search cost consumers pay to obtain an additional price quotation (e.g. ...
Article
Full-text available
In this paper we examine the effect of competition on price dispersion and argue that the effect is contingent on the ability of firms to meet market demand. Our comparative static results show that competition among symmetrically capacity-unconstrained firms, or among firms with asymmetric capacities leads to an overall price increase along the distribution function. To investigate these findings empirically, we use a novel data set from the U.S. corn seed industry with firm and farm level sales information for conventional and genetically modified corn seeds between 2004 and 2009. We estimate the empirical model using the Fixed Effect Instrumental Variable Quantile Regression and find evidence consistent with the theory. The analysis also shows that capacity-unconstrained seed firms charge a price premium, confirming the positive relationship between product availability and pricing found in our theoretical model.
... Early studies often regard the online and offline channels as substitutes, with online firms competing with their offline competitors. These include, among others, Bakos (1997), Lal and Sarvary (1999), Baye and Morgan (2001), Dinlersoz and Pereira (2007), and Kocas and Bohlmann (2008). In contrast, a more recent stream of the literature focuses on the complementarity between online and offline channels, identifying several layers of online/offline complementarity. ...
Article
Full-text available
In contrast to offline consumers, online consumers cannot physically inspect a product before purchase, and thus may remain uncertain about the product quality. We show that building a physical shop can generate an informed offline consumer base, which may allow the firm to reveal its product quality to online buyers through optimal pricing. Our results imply that, to resolve consumers’ uncertainty regarding product quality, a firm does not need to completely cover the market by building numerous physical stores; a small number of physical shops may be sufficient to address such pre-purchase uncertainty.
Conference Paper
This thesis comprises three essays addressing questions related to pricing, competition, and consumer welfare in imperfectly competitive industries characterised by the existence of demand and supply side frictions. Chapter 1 studies a dynamic pricing game amongst differentiated multiproduct oligopolists who have incentives to temporarily lower prices to attract new consumers who are more likely to purchase the same product again at a higher price due to inertia. The novel feature of the model, which allows to explain persistence in the observed patterns of retail prices, is the possibility of costly price adjustment. The magnitude of adjustment costs is estimated using scanner data on purchases of a category of dairy products by UK households. The main results suggest that adjustment costs can be substantial for manufacturers, but they are passed through to the consumers only on a very limited scale. Chapter 2 explores an alternative explanation for price dispersion by introducing a model with search frictions and private information about marginal costs. Consumers decide how many sellers to visit who in equilibrium set prices in a fashion similar to bidding in a reverse first-price auction with an unknown number of competitors. The chapter shows how the distributions of search costs and firm heterogeneity can be nonparametrically identified and analyses convergence rates of the proposed estimators. Chapter 3 uses an extension of the search model proposed earlier to study the value of information provided by mortgage brokers in the UK. Prospective borrowers can either directly search and apply for mortgages with different lenders or use a broker who finds the best rate on their behalf. The main finding suggests that, on average, the existence of brokers substantially fosters competition between lenders, leads to lower monthly payments in equilibrium and reduces the deadweight loss arising as a result of costly search.
Article
Full-text available
Research Summary New entrants often face uncertainty regarding how to optimally position themselves within product markets. We suggest that new entrants can use two important schemas to strategically categorize themselves to gain a competitive advantage in platform markets: category exemplars and category prototypes. Using a unique dataset of more than 83,000 new Google Play developers and more than 139,000 apps, we find that the optimally distinct entry point is at a high level of exemplar similarity and a low level of prototype similarity. We find that greater alignment of an entrant with the prototype corresponds to a weaker benefit of exemplar similarity. These findings have important implications for understanding competitive dynamics within product markets, strategic positioning at entry, and the interdependence of strategic categorization decisions. Managerial Summary Entrepreneurial startups often find it difficult to know how to optimally position their products among a large number of rivals in highly competitive platform markets. Our study suggests that these startups can draw on two reference points to help determine the optimal positioning for their products: category exemplars and category prototypes. Exemplars include the most successful products in a market category while prototypes represent the most common products in a category. Drawing on a large dataset obtained from the Google Play app store, we find that developers can substantially increase the installs of their first app by crafting an app text description that is as similar as possible to the description of a category exemplar and as different as possible from the category’s prototypical description.
Thesis
Les plateformes digitales sont des modèles d’affaires de la quatrième révolution industrielle. Si la Science de gestion donne des interprétations holistiques de la plateforme, elles manquent à la décrire dans un consensus théorique généralisable. Les Sciences économiques précisent des mécaniques générales, mais sont confrontées à la difficulté d’en modéliser l’entièreté. La présente thèse propose de théoriser l’ensemble d’un écosystème de plateforme, marchande et orientée consommateur, au travers d’une approche bi-disciplinaire entre Sciences économiques et de gestion. Au sein d’une monographie, un travail de modélisation théorique des heuristiques dans la plateforme propose un canevas normatif du modèle d’affaires de plateforme. Une expérimentation de simulation d’une plateforme auprès de 1740 personnes a permis, par la réfutation ou la confirmation du modèle théorique, de distinguer les phénomènes de rationalisation, opportunisme ou d’attachement dans ce commerce de service écosystémique. Cette recherche contribue aux connaissances sur les plateformes digitales en montrant que la plateforme n’est pas une organisation robotisée dans un marché, ni un espace de partage altruiste ou un emblème de la désintermédiation, mais un modèle de commerce hybride mêlant l’ensemble de ces symboliques dans un idéal incitant chaque acteur à générer de la valeur. Cette thèse les articule et affirme la pertinence d’une approche d’économie organisationnelle pour ce modèle. Elle modère la dominance du consommateur et fait état de nombreuses relations d’alliance, d’intégration et de communication de la valeur., contre-intuitives aux sciences de l’économie néo-classique mais associables aux sciences gestionnaires. Ses outils, les algorithmes, possèdent une influence symbolique permettant la détermination d’un positionnement marketing de la plateforme, avant une influence sur la structure organisationnelle de sa communauté marchande.
Article
We examine the effects of privacy policies regarding transactions (e.g., price/quantity) data on online shopping platforms. Disclosure of transactions data induces consumer signaling behavior that affects merchant pricing decisions and the welfare of platform participants. A profit‐maximizing platform prefers the disclosure policy that maximizes total welfare. Although this policy benefits sophisticated consumers, it harms unsophisticated (myopic) consumers. Consequently, the welfare effects of alternative privacy policies, data breaches, deceptive privacy policies, and opt‐in/opt‐out requirements can differ sharply, depending on the level of consumer sophistication and on other factors such as the prevailing status quo.
Article
Full-text available
Limited information is the key element generating price dispersion in models of homogeneous‐goods markets. We show that the global relationship between information and price dispersion is an inverse‐U shape. We test this mechanism for the retail gasoline market using a new measure of information based on commuter data from Austria. Commuters sample gasoline prices on their commuting route, providing us with spatial variation in the share of informed consumers. Our empirical estimates are in line with the theoretical predictions. We also quantify how information affects average prices paid and the distribution of surplus in the gasoline market. This article is protected by copyright. All rights reserved
Article
Full-text available
The large and growing industry of price comparison websites (PCWs) or “web aggregators” is poised to benefit consumers by increasing competitive pricing pressure on firms by acquainting shoppers with more prices. However, these sites also charge firms for sales, which feeds back to raise prices. I find that introducing any number of PCWs to a market increases prices for all consumers, both those who use the sites, and those who do not. I then use my framework to identify ways in which a more competitive environment could be achieved. This article is protected by copyright. All rights reserved
Chapter
Dieses Kapitel beschreibt die veränderten Wettbewerbsbedingungen in der digitalen Wirtschaft und geht insbesondere auf die Rolle von Plattformen als Intermediäre sowie von Daten als kritische Ressource ein. Zudem werden die bedeutendsten Herausforderungen für das Wettbewerbsrecht dargelegt, welche sich in der Abgrenzung relevanter Märkte, dem Umgang mit algorithmischer Preisbildung, dem Missbrauch von Marktmacht durch Plattformen, die als Gatekeeper fungieren, und sog. Killerakquisitionen bestehen. Zudem werden die Problematik der Informationsverzerrung durch Plattformen diskutiert und die jüngsten Änderungen im Kartellrecht in Bezug auf die Digitalwirtschaft erklärt.
Article
Zusammenfassung In diesem Beitrag beschreiben Justus Haucap und Heike Schweitzer die wesentlichen Änderungen im deutschen Kartellrecht, die in Bezug auf die Begrenzung der Marktmacht digitaler Plattformen mit der 10. Novelle des Gesetzes gegen Wettbewerbsbeschränkungen (GWB) im Januar 2021 verabschiedet wurden. Diese Änderungen vergleichen sie mit den Vorschlägen für einen Digital Markets Act (DMA), welche die Europäische Kommission im Dezember 2020 vorgelegt hat. Zudem erörtern sie das Problem der sogenannten Killerakquisitionen, auf das weder die GWB-Novelle noch der Vorschlag für einen DMA eingeht.
Article
This article investigates the strategies of a data broker selling information to one or to two competing firms. The data broker combines segments of the consumer demand that allow firms to third-degree price discriminate consumers. We show that the data broker (1) sells information on consumers with the highest willingness to pay; (2) keeps consumers with low willingness to pay unidentified. The data broker strategically chooses to withhold information on consumer demand to soften competition between firms. These results hold under first-degree price discrimination, which is a limit case when information is perfect.
Article
We model optimal firm pricing and advertising intensity strategies under both uniform and targeted advertising regimes in a duopoly market in which firms have asymmetric loyal market shares and must engage in costly informative advertising to attract customers. In addition to loyal customers who only purchase from their preferred firm, there are shoppers who purchase at the lowest advertised price. Under uniform advertising, prices are communicated to the entire market while under targeted advertising the firm can limit advertising to its own loyal customers or to its loyal customers and the shoppers. Our main results explore the strategic trade‐off between advertising intensity and price competition and demonstrate how optimal firm pricing, advertising strategies, and equilibrium outcomes differ with the relative size of a firm's loyal market and with the advertising regime. We also show that targeted advertising may or may not increase social welfare, and that it increases consumer surplus only if the cost of advertising is sufficiently high. In addition, it is possible that the firm with the larger loyal market earns lower profits under targeted rather than uniform advertising. Notwithstanding this, in an extension we show firms generally have an incentive to invest ex‐ante in targeting technology.
Chapter
Die zunehmende Bedeutung von Plattformen und die Rolle der Daten als kritische Ressource sind die beiden wesentlichen Treiber des Strukturwandels in der digitalen Wirtschaft. Gerade im Bereich der digitalen Plattformökonomie haben einige Unternehmen dominieren heute einige Unternehmen ganze Branchen. Dies stellt Kartellrecht und Regulierung vor neue Herausforderungen. Der vorliegende Beitrag analysiert die Schärfung der kartellrechtlichen Missbrauchsaufsicht in Deutschland durch die Novelle des Gesetzes gegen Wettbewerbsbeschränkungen (GWB) und vergleicht diese mit dem Vorschlag für einen europäischen „Digital Markets Act“ (DMA). Zudem wird das Problem der sog. Killerakquisitionen und der „Kill Zone“ in der Fusionskontrolle erörtert. Bei allen Unterschieden zwischen GWB und DMA ist die Einhegung der neuen Machtpositionen in Europa auf einem guten Weg. Jedoch existieren zahlreiche regulatorische und administrative Blockaden, welche die Digitalisierung insbesondere in Deutschland lähmen. Daher muss nun eine systematische Aufarbeitung der Hindernisse für die Digitalisierung erfolgen, um wichtige Impulse für eine innovationsfreundliche Politik zu geben.
Article
Full-text available
We study strategic interactions in markets in which firms sell to consumers both directly and via a competitive channel (CC), such as a price comparison website or marketplace, where multiple sellers’ offers are visible at once. We ask how a CC’s size influences market outcomes when some consumers have limited price information. A bigger CC means more consumers compare prices, increasing within-channel competition. However, we show such seemingly pro-competitive developments can raise prices and harm consumers by weakening between-channel competition.
Preprint
Full-text available
This paper defends the viability of de-idealization strategies in economic modelling against recent criticism. De-idealization occurs, roughly, when an idealized assumption of a theoretical model is replaced with a more realistic one. Recently, some scholars have raised objections against the possibility or fruitfulness of de-idealizing economic models, suggesting that economists don't employ this kind of strategy. We present a detailed case study from the theory of industrial organization, discussing three different models, two of which can be construed as de-idealized versions of the first (the so-called Bertrand model of oligopoly). We conclude that recent pessimism about de-idealization in economics is largely unfounded, and that de-idealization strategies are not only possible but also widely employed in economics.
Article
We study a model of simultaneous price competition that subsumes many employed in the literature over the last several decades. Firms sell a homogeneous good to consumers characterized by the number of prices they (exogenously) consider. We show there is a unique equilibrium if and only if some consumers consider exactly two prices. The equilibrium is in symmetric mixed strategies. When no consumer considers exactly two prices, there is, in addition, an uncountable infinity of asymmetric equilibria. Our results show that the paradigm generically produces a unique equilibrium, and only the commonly sought symmetric equilibrium is robust to perturbations in consumer behavior.
Article
In this paper, we study whether a monopolistic platform prefers to impose price parity on sellers when the latter may sell directly to consumers. The platform delivers a higher quality to consumers than the direct sales channel and may generate efficiency gains for sellers. We show that the platform imposes price parity if the degree of heterogeneity between consumers is high with respect to the quality of service on the seller side. This restriction lowers the total transaction fee paid by consumers and sellers. Consumers who buy from sellers with low transaction benefits pay a lower purchase price. The average consumer and seller surplus may either increase or decrease.
Article
Full-text available
It is shown that wquilibria with dispersed prices exist in environments with identical and rational agents on both sides of the market. In particular, the original Stigler model of nonsequential search often has many equilibria, some with price dispersion. Also, price dispersion holds in equilibrium in general if search is "noisy," i.e., there is some chance of learning two or more prices when an agent is looking for one price.
Article
Full-text available
The Netherlands introduced a new health insurance system in January 2006, a system based on managed competition. Such a system critically hinges on consumers that search. It is for this reason we think it is important to investigate the extend to which consumers search, how they search and why they search ´or don’t search. The price dispersion observed in the insurance market after the reform suggests the number of consumers that searches is low. We set up a search model for insurance that includes the main features of the Dutch health insurance market after the reform and test the hypotheses from this model on the data.
Article
In a generalization of the Butters advertising model, the equilibrium involves one firm that advertises at least twice as much as the others, who all advertise equally. A cartel formation game is considered, and any equilibrium cartel involves at least two, but generally not all, firms. In one equilibrium, only the largest firms join the cartel. A merger game is considered, and, in equilibrium, the large firm buys the other firms in sequence, with discounting equalizing the expected utility of the targets and prices rising over time. Journal of Economic Literature Classification Numbers: D43, D83, L11, L13, L41.
Article
Traditional and modern mass media – such as television, newspapers, magazines, and Internet sites – typically derive the bulk of their revenues from advertisements rather than subscriptions. We present a simple model that explains this phenomenon.
Article
We show that the Varian model of sales with more than two firms has two types of equilibria: a unique symmetric equilibrium, and a continuum of asymmetric equilibria. In contrast, the 2-firm game has a unique equilibrium that is symmetric. For the n-firm case the asymmetric equilibria imply mixed strategies that can be ranked by first-order stochastic dominance. This enables one to rule out asymmetric equilibria on economic grounds by constructing a metagame in which both firms and consumers are players. The unique subgame perfect equilibrium of this metagame is symmetric.
Article
A finite number of identical stores sell a homogeneous good to consumers with heterogeneous search costs who search sequentially with perfect recall and without replacement. Consumers' search rules are optimal with respect to the stores' pricing strategies, and consumers must visit a store to obtain information about its actual price. A symmetric Nash equilibrium (SNE) always exists. The model exhibits a variety of equilibrium behaviors between monopoly pricing and marginal-cost pricing. The competitiveness of a market depends crucially on the shape of the search cost distribution, moreso than on the number of competing firms.
Article
The model of Burdett and Judd (Econometrica51 (1993), 955-969) is generalized to the case of may goods. Consumers choose the best price observed for each good. There are two classes of equilibria, those that involve constant expected profits for each good independently of price and those with increasing profits for each good in price. A continuum of the latter type always exists. These equilibria are qualitatively different than the unique equilibrium of the single-good case. Journal of Economic Literature Classification Numbers: D83, D43, L13.
Article
An explicit solution of an equilibrium model with price-setting firms and searching customers makes possible a number of comparativestatics predictions about how cost differences among firms, search costs of customers, and taxes will affect the mean and variance of the distribution of market prices. Another implication of the model is that a firm's demand depends on the difference between its price and the average price in the market.
Article
This paper explores the role of learning in an equilibrium search model with asymmetric information. Firms with identical but privately observed marginal cost sell a homogeneous good to heterogeneously informed consumers. A reservation-price equilibrium exists if the uninformed consumers' search cost is sufficiently large. In this equilibrium, the amount of price dispersion is inversely related to the realization of marginal cost. Also, the average price level is less responsive to cost changes than when cost is observable. Finally, uncertainty about firms' marginal cost increases the expected price level. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Article
N sellers advertise a homogeneous good to M buyers whose only source of information is this advertising. There is a unique Nash Equilibrium (NE) in which sellers choose a common advertising level and mix over prices. This NE approaches marginal cost pricing as advertising costs decrease, and approaches monopoly pricing as advertising costs increase. More sellers induce lower prices and less advertising per seller; however, the social welfare effect can be negative for some advertising technologies. The NE advertising level is generically less than socially optimal. Journal of Economic Literature Classification Numbers: D00, D4, D43, D8, D83, I00, I1, I13, M37.
Article
In this paper, small firms sell a homogeneous good to small consumers under conditions of free entry, but consumers receive price information only through firms' advertising. In equilibrium, every firm on the continuous price distribution buys less advertising than is socially optimal. The result is robust if firms advertise in just one medium. If readers of different advertising media are positively correlated, excess advertising can occur in media used exclusively to advertise discount prices. Copyright 1991 by American Economic Association.
Article
N identical stores compete by choosing prices for a homogeneous good with constant marginal costs. Consumers search sequentially with perfect recall for the lowest price. One class of consumers, called shoppers, have zero search costs, while all other consumers have a positive search cost, c. There is a unique symmetric Nash equilibrium price distribution with the property that it changes smoothly from "marginal cost pricing" when all consumers are shoppers and/or c = 0 and "monopoly pricing" when no consumers are shoppers. Remarkably, as the number of stores increases, the Nash equilibrium becomes more monopolistic. Copyright 1989 by American Economic Association.
Article
This paper studies the role and implications of price advertising when shopping trips are costly to consumers. The authors present a model where consumers search sequentially and where stores advertise the price. Their model has a unique equilibrium exhibiting price dispersion. The model generates predictions about the shape of the price distribution and firms' advertising behavior. Also when the initial advertising costs are precisely zero, entry drives the equilibrium to the perfectly competitive outcome; while otherwise entry drives prices higher. Finally, when advertising costs shrink, prices become competitive; however, when search costs shrink, prices remain bounded above marginal production costs. Copyright 1993 by The Econometric Society.
Article
Equilibrium price distributions (for a homogeneous product) consistent with individual incentives are investigated. They arise in informationally imperfect markets in which the only primitive datum is the distribution of search costs. It is shown that single, multi- and continuous price distributions are all viable long-run phenomena depending on the nature of search costs. A method for computing equilibrium price distributions is also provided.
Article
In this paper we study the role of promotional expenditures by sellers in a model of product differentiation. Advertising conveys full and accurate information about the characteristics of products. Heterogeneous consumers, who have no source of information other than advertisements, seek to purchase the products that best fit their needs. Despite the roles played by advertising in improving the matching of products and consumers, and in increasing the elasticity of demand faced by each firm, we find that the market-determined Jevels of advertising are excessive, given the extent of diversity in the market. We derive a promotional equilibrium based on a specific information transmission technology, paying explicit attention to the structure of consumer information and its impact on firms' demand curves. This allows us to study the effects of changes in the advertising technology, including an increased ability to target messages to specific groups of consumers, on the equilibrium in the product market. We find that decreased advertising costs may reduce profits by increasing the severity of price competition.
Article
A general model is presented for studying the connection between imperfect information and imperfect competition, comparing the methodology involved in generating monopolistic competition due to consumers' imperfect information with the methodology involved in generating monopolistic competition due to product differentiation. The model specifically shows how different monopolistically competitive equilibria may arise from consumers' imperfect information regarding different prices of a homogeneous commodity. Under such a structure, there is no longer one market place, each firm may constitute a local market, and different consumers with different search costs may equilibrate the market at different prices. The nature of the differences in consumers' search costs determine what type of an equilibrium arises: a pefectly competitive, a monopolistically competitive, or a two-price equilibrium. There is need for a dynamic model that deals with the problems of maintained ignorance and the possibility of a firm's acquiring a price reputation over time.
Article
This chapter presents a model in which sellers have constant average cost curves, buyers are transient and buy one unit each in a single purchase, and the only possible information flow is through advertising. The chapter also discusses the market's efficiency in transmitting information. Advertising may be interpreted more or less broadly to incorporate any selection of the usual advertising expenses, displays, promotions, packaging, rent for conspicuous locations, and the like. The assumption of a homogeneous good rules out all problems concerning quality differences, jointly provided services, locational convenience, and the like. The assumption that all agents know the price distribution is especially difficult to accept.