The Distributional Effects of 'Fulfilled By Amazon' (FBA)

42 Pages Posted: 27 Feb 2023 Last revised: 3 Jul 2023

See all articles by Garud Iyengar

Garud Iyengar

Columbia University - Department of Industrial Engineering and Operations Research (IEOR)

Yuanzhe Ma

Columbia University - Department of Industrial Engineering and Operations Research

Thomas J Rivera

McGill University

Fahad Saleh

University of Florida

Jay Sethuraman

Columbia University

Date Written: February 21, 2023

Abstract

We provide an economic model of an e-commerce retail platform (e.g., Amazon) that offers a fulfillment service (e.g., "Fulfilled By Amazon") to merchants that sell on its platform. We demonstrate that the introduction of such a service generates distributional effects for the platform participants. In particular, while such a service benefits low service quality merchants and consumers, it also reduces welfare for high service quality merchants. We compare the economic implications of introducing the fulfillment service when it is optimally designed by the platform or an independent logistics company. We show that the distributional welfare effects are more pronounced when the platform provides the fulfillment service thereby demonstrating the impact that dual ownership of the platform and fulfillment service has on participant welfare.

Keywords: Amazon, FBA, E-commerce Platform

JEL Classification: D2, D4, L11, L12

Suggested Citation

Iyengar, Garud and Ma, Yuanzhe and Rivera, Thomas and Saleh, Fahad and Sethuraman, Jay, The Distributional Effects of 'Fulfilled By Amazon' (FBA) (February 21, 2023). Available at SSRN: https://ssrn.com/abstract=4365855 or http://dx.doi.org/10.2139/ssrn.4365855

Garud Iyengar

Columbia University - Department of Industrial Engineering and Operations Research (IEOR) ( email )

331 S.W. Mudd Building
500 West 120th Street
New York, NY 10027
United States

Yuanzhe Ma

Columbia University - Department of Industrial Engineering and Operations Research ( email )

500 W. 120th Street #416
New York, NY 10027
United States

Thomas Rivera

McGill University ( email )

1001 Sherbrooke St W
Montreal, Quebec h3A 1G5

Fahad Saleh (Contact Author)

University of Florida ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://www.fahadsaleh.com

Jay Sethuraman

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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

Paper statistics

Downloads
281
Abstract Views
2,186
Rank
205,588
PlumX Metrics