Should Platforms Be Allowed to Sell on Their Own Marketplaces?

33 Pages Posted: 15 Jun 2020 Last revised: 30 Jul 2021

See all articles by Andrei Hagiu

Andrei Hagiu

Boston University - Questrom School of Business

Tat-How Teh

National University of Singapore (NUS) - Department of Economics

Julian Wright

National University of Singapore (NUS) - Department of Economics

Date Written: May 7, 2020

Abstract

A growing number of platforms including those run by Amazon, Apple, Google and Microsoft operate in a dual mode: running marketplaces for third-party products, while also selling their own products on those marketplaces. We build a model to explore the implications of this controversial practice, taking into account the endogeneity of third-party sellers' innovation decisions. We analyze the tradeoffs that arise from a ban on the dual mode, showing how such a ban can harm consumer surplus and welfare even when the platform would otherwise engage in product imitation and self-preferencing. Instead, in the empirically most relevant scenarios, policies that prevent platform imitation and self-preferencing lead to better outcomes than an outright ban on the dual mode.

Keywords: two-sided platform, reseller, marketplace, separation

JEL Classification: L5

Suggested Citation

Hagiu, Andrei and Teh, Tat-How and Wright, Julian, Should Platforms Be Allowed to Sell on Their Own Marketplaces? (May 7, 2020). Available at SSRN: https://ssrn.com/abstract=3606055 or http://dx.doi.org/10.2139/ssrn.3606055

Andrei Hagiu

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Tat-How Teh (Contact Author)

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

Julian Wright

National University of Singapore (NUS) - Department of Economics ( email )

AS2 Level 6, 1 Arts Link
Singapore 117570
Singapore
6568743941 (Phone)
6567752646 (Fax)

HOME PAGE: http://profile.nus.edu.sg/fass/ecsjkdw/

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