Marketplace or reselling? A signalling model

• Type: Article in International Scientific Journal
• Date: 2020

Authors

Belhadj, N (Author) Other; Laussel, D (Author) Other; Joana Resende (Author) FEP

Journal

Title: Information Economics and Policy

Vol. 50 No.

ISSN: 0167-6245

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 38 Citations

Other information

Authenticus ID: P-00S-16T

DOI: 10.1016/j.infoecopol.2019.100834

Abstract (EN): This paper shows that the platforms' private information on demand may explain the empirical observation that platforms like Amazon resell high-demand products, while acting as marketplace for low-demand goods. More precisely, the paper examines the strategic interaction between a seller and a better informed platform within a signalling game. We consider that the platform may choose between two distinct business models: act as a reseller or work as a pure marketplace between the buyers and the seller. The marketplace mode, which allows to internalize the spillover between the platform's sales and the seller's direct sales is always preferred for a low-value good. The reselling mode, which allows the platform to take advantage of its private information, may be selected in the case of high-value goods provided that (i) the externalities between direct sales and platform sales are not too strong and (ii) the difference between consumers' willingness to pay for the high and the low-value goods is large enough. Under these conditions, the game displays a Least-Cost Separating Equilibrium in which the platform works as a marketplace for low-demand goods, while it acts as a reseller in the case of high-demand goods.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 8