Hybrid Platform Model

69 Pages Posted: 14 Jul 2021

See all articles by Simon P. Anderson

Simon P. Anderson

University of Virginia - Department of Economics

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: June 2021

Abstract

We provide a canonical and tractable model of a trade platform enabling buyers and sellers to transact. The platform charges a percentage fee on third-party product sales and decides whether to be "hybrid", like Amazon, by selling its own product. It thereby controls the number of differentiated products (variety) it hosts and their prices. Using the mixed market demand system, we capture interactions between monopolistically competitive sellers and a sizeable platform product. Using long-run aggregative games with free entry, we endogenize seller participation through an aggregate variable manipulated by the platform's fee. We show that a higher quality (or lower cost) of the platform's product increases its market share and the seller fee, and lowers consumer surplus. Banning hybrid mode benefits consumers. The hybrid platform might favor its product and debase third-party products if the own product advantage is sufficiently high. We also provide some tax policy implications.

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

Suggested Citation

Anderson, Simon P. and Bedre-Defolie, Özlem, Hybrid Platform Model (June 2021). CEPR Discussion Paper No. DP16243, Available at SSRN: https://ssrn.com/abstract=3886686

Simon P. Anderson (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3861 (Phone)
804-982-2904 (Fax)

Özlem Bedre-Defolie

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
1,317
PlumX Metrics