Download this Paper Open PDF in Browser

Platform Monopolization by Narrow-PPC-BPG Combination: Booking et al.

16 Pages Posted: 13 Jun 2017 Last revised: 12 Aug 2017

Francisca Wals

University of Amsterdam - Faculty of Economics and Business (FEB)

Maarten Pieter Schinkel

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: June 13, 2017

Abstract

The price parity clauses (PPCs) that online booking platforms impose have come under antitrust scrutiny. Wang and Wright (2017) argue that by preventing showrooming, a narrow PPC can reduce search costs and benefit consumers under between-platform competition. In response to having to give up its wide PPC to hotels, Booking.com emphasized its best price guarantee (BPG) to customers. We observe that a narrow PPC combined with a BPG leaves only Wang and Wright's Price Parity and Monopoly Equilibrium (PPME), in which consumers are worse off than with no platform operating at all. A more efficient (incumbent) platform can deter entry with the BPG, whereas upon entry of an equally efficient platform, the BPG allows the platforms to price coordinate. The narrow PPC eliminates competition from direct sales channels. The detrimental narrow-PPC-BPG contract combination that we point out calls for different platform competition policy.

Keywords: booking platform, price parity clause, best price guarantee, entry deterrence, collusion

JEL Classification: D21, K21, L41

Suggested Citation

Wals, Francisca and Schinkel, Maarten Pieter, Platform Monopolization by Narrow-PPC-BPG Combination: Booking et al. (June 13, 2017). Amsterdam Law School Research Paper No. 2017-32; Amsterdam Center for Law & Economics Working Paper No. 2017-01. Available at SSRN: https://ssrn.com/abstract=2985317

Francisca Wals

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Maarten Pieter Schinkel (Contact Author)

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Paper statistics

Downloads
134
Rank
185,102
Abstract Views
427