will give a presentation on
Abstract:
Platforms greatly facilitate transactions between buyers and sellers. This allows platforms to gather detailed information on transactions and tailor their strategies when deciding to introduce their own products that compete with independent traders. Concerns have been raised that such an information advantage of the platform can hurt traders. However, we show that the usage of more detailed and individualised information by the platform can actually benefit traders by relaxing competition between them. This occurs as traders have more incentives to raise their prices in order to hide the popularity of their products and prevent entry of the platform in their product categories. The competition relaxing effect is particularly strong when traders are close substitutes and face little demand uncertainty within their category. In addition, we show that the interests of platforms and traders are more aligned and both can benefit from more individualised information usage when proportional fees are used, but consumers are hurt in this case.