Dealership or Marketplace: A Dynamic Comparison
65 Pages Posted: 29 Oct 2019
Date Written: October 19, 2019
We compare two common business models, dealership and marketplace, that bridge the demand and supply sides of two-sided markets. We show, in a dynamic setting, that the dealership model is more profitable if the demand side of the market is relatively small or the sellers are impatient. While the two models differ substantially in pricing power, inventory risk, fee structure, and waiting time, both models share fundamental similarities when the markets are thick: optimal revenues converge and there is a one-to-one mapping between their optimal policies.
Keywords: dynamic pricing, business models, dynamic game, Markov perfect equilibrium, structural properties
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