City Research Online

Abstract

Leading retailers have opened up their online storefronts to competitors by operating marketplaces for third-party sellers. We develop a model of entry and price competition at the product market level to analyze the competitive interactions arising within these retailer-led marketplaces. We show that the retailer benefits from the marketplace by mitigating his own capacity constraints and manages competition from third-party sellers through his control of the storefront: by setting the marketplace fee, by steering consumers, and by allocating his own capacity in response to the product supply choices of third-party sellers. We draw managerial implications and examine policy interventions. We find that regulation of marketplace fees has the strongest potential to increase welfare outcomes. Our model provides novel insights into the mechanisms at play in retailer-led marketplaces and explains their prominent role in online retail.

Publication Type:	Article
Additional Information:	This article will be published in its final form in Management Science by INFORMS and it will be available at: https://pubsonline.informs.org/journal/mnsc
Publisher Keywords:	Assortment capacity, Marketplace fees, Product entry, Price competition, Consumer steering
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments:	Bayes Business School Bayes Business School > Management
SWORD Depositor:	Symplectic Administrator

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