Dec. 5 (11:00-12:00) room C.714
Vladimir Chernyshov (Higher School of Economics, Moscow)
Bias and pricing in vertically integrated platforms
This paper studies the behavior of vertically integrated platforms such as Netflix, Amazon, or television channels with their own production studios. It examines the interaction between the platform and the sellers listed on the platform, as well as the incentives for the platform to bias its recommendation mechanism. We consider a model with two types of consumers: loyals who are willing to pay any price set by their preferred seller, and disloyals, whom we call “shoppers,” who choose the cheapest product available on the platform. The interaction occurs sequentially: sellers first learn the platform’s bias, then set their own pricing strategies accordingly. Once sellers choose their prices, the platform, observing the prices of all sellers, sets its own price. We obtain the difference in pricing strategies of the platform and sellers, describe how price distribution depends on the shares of loyals, and calculate the optimal platform bias.