Hybrid Platform Model

50 Pages Posted: 25 Jun 2021 Last revised: 2 Feb 2023

See all articles by Simon Anderson

Simon Anderson

University of Virginia (UVA), College of Arts and Sciences, Department of Statistics, Students

Özlem Bedre-Defolie

European School of Management and Technology; European University Institute - Economics Department (ECO); European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for a Digital Society; Centre for Economic Policy Research (CEPR); University of Bergen

Date Written: July 23, 2022

Abstract

We provide a canonical and tractable model of a trading platform which controls the product variety it hosts and product prices 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 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. Banning hybrid mode benefits consumers if and only if the ban leads to pure marketplace. The hybrid platform debases third-party products if its products are strong enough. We capture two-sided network effects by endogenizing buyer participation via costs to discover tastes for products and seller participation via an aggregate manipulated by the platform's fee.

Keywords: Trade platform, hybrid business model, insidious steering, antitrust policy, tax policy

JEL Classification: D42, L12, L13, L40, H25

Suggested Citation

Anderson, Simon and Bedre-Defolie, Özlem, Hybrid Platform Model (July 23, 2022). Available at SSRN: https://ssrn.com/abstract=3867851 or http://dx.doi.org/10.2139/ssrn.3867851

Simon Anderson

University of Virginia (UVA), College of Arts and Sciences, Department of Statistics, Students ( email )

VA
United States

Özlem Bedre-Defolie (Contact Author)

European School of Management and Technology ( email )

European University Institute - Economics Department (ECO) ( email )

Villa La Fonte
Via delle Fontanelle 18
Florence, Fiesole 50014
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for a Digital Society ( email )

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Bergen ( email )

Muséplassen 1
N-5008 Bergen, +47 55 58
Norway

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