Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300680 
Year of Publication: 
2024
Series/Report no.: 
ZEW Discussion Papers No. 24-051
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
We study a hybrid marketplace where a vertically integrated platform competes with a seller in a horizontally differentiated downstream market. The platform has a data advantage and can price discriminate consumers, whereas the seller cannot. Our analysis shows that, by properly setting the per-unit transaction fee, the platform can always avoid head-to-head competition with the seller, regardless of the level of horizontal differentiation. Mandating data-sharing, which allows the seller to also price discriminate, does not seem to solve this problem and, in fact, aggravates it further, generally benefiting the platform. The seller is better off only if it is less efficient than the platform, whereas consumers are worse off. We propose that preventing the platform from adjusting the fee after the data-sharing mandate is not enough to reinstate competition in the downstream market. We then show that banning the hybrid business model and forbidding the use of data for price discrimination increase consumer surplus, even if the seller becomes a monopolist. In other words, we propose that the harm to competition comes from the platform's business model rather than from its information advantage.
Subjects: 
hybrid platforms
data-sharing
vertical integration
price discrimination
JEL: 
D42
L12
L41
Document Type: 
Working Paper

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