Dual-Role Platforms and Self-Preferencing: Sequential Search Approach

41 Pages Posted: 4 Feb 2021 Last revised: 14 Oct 2022

See all articles by Yuta Kittaka

Yuta Kittaka

Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Susumu Sato

Institute of Economic Research, Hitotsubashi University

Date Written: October 13, 2022

Abstract

We analyze the welfare properties of a dual-role platform's self-preferencing by studying the situation wherein a vertically integrated platform makes its own product prominent against the third-party seller's product.
We show that the welfare effects of self-preferencing depend on commission rates. Particularly, the prohibition of self-preferencing may harm welfare and consumer surplus when commission rates are high, whereas a vertical separation policy always improves consumer welfare through lower prices. This result sheds light on a potential risk of the policy that requires dominant platforms to be neutral while allowing them to sell on the marketplaces.

Keywords: consumer search, dual-role platform, self-preferencing, structural separation

JEL Classification: D11, D83, L13, L49

Suggested Citation

Kittaka, Yuta and Sato, Susumu, Dual-Role Platforms and Self-Preferencing: Sequential Search Approach (October 13, 2022). Available at SSRN: https://ssrn.com/abstract=3736574 or http://dx.doi.org/10.2139/ssrn.3736574

Yuta Kittaka (Contact Author)

Hitotsubashi Institute for Advanced Study, Hitotsubashi University ( email )

Japan

Susumu Sato

Institute of Economic Research, Hitotsubashi University ( email )

Tokyo
Japan

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