Organised by the Governance and Regulation Chair.

Hybrid Platform Model: Monopolistic competition and dominant firm

By Özlem Bedre-Defolie, ESMT Berlin

Mardi 28 mars 2023
12h15 - 13h30
A 411 - Université Paris Dauphine

Hybrid Platform Model: Monopolistic competition and dominant firm

Özlem Bedre-Defolie

We provide a canonical and tractable model of a trading platform which controls the variety and prices of the products it hosts by charging a percentage fee on sellers and choosing whether to sell its own product (hybrid mode). We micro-found and derive a mixed market demand system for differentiated products to capture interactions between monopolistically competitive (fringe) sellers and a sizeable range of platform products. The hybrid platform steers consumers towards its products by charging higher seller fees than pure marketplace. This “insidious steering” intensifies the better the platform’s own products. The hybrid platform debases third-party products if its products are strong enough. With perfectly elastic fringe entry, banning hybrid mode benefits consumers if and only if the ban leads to a pure marketplace. However, for sufficiently inelastic fringe, consumers might benefit from increasing the platform products’ presence.

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