Price Competition Under Information (Dis)Advantage

Abstract

We examine the impact of asymmetric access to competitively sensitive information on a vertically integrated e-commerce platform. High-frequency data variation facilitates identifying supply-side information asymmetry: while both the platform owner and third-party sellers base pricing on past sales, only the owner leverages competitors' sales. We estimate a price competition model with demand uncertainty and heterogeneous beliefs. Counterfactual analyses of symmetric access, whether by restricting or sharing superior information, suggest that information advantage can be anti-competitive, reducing consumer and social welfare, and that this impact interacts with vertical incentives. Furthermore, sharing information leads to greater welfare by improving market efficiency.

Keywords: Asymmetric information, price competition, e-commerce, digital platform, vertical integration, information design