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 work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License. You are free to download this work and share with others commercially or noncommercially, but cannot change in any way, and you must attribute this work as “Management Science. Copyright © 2025 The Author(s). https://doi.org/10.1287/mnsc.2023.00315, used under a Creative Commons Attribution License: https://creativecommons.org/licenses/by-nd/4.0/.
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 > Faculty of Management
SWORD Depositor:	Symplectic Administrator

Export

Downloads