Affiliation:
1. Harvard Business School Department of Economics, National University of Singapore
Abstract
Abstract
Suppose an intermediary provides a benefit to buyers when they purchase from sellers using the intermediary’s technology. We develop a model to show that the intermediary would want to restrict sellers from charging buyers more for transactions it intermediates. With this restriction an intermediary can profitably raise demand for its services by eliminating any extra price buyers face for purchasing through the intermediary. We show that this leads to inflated retail prices, excessive adoption of the intermediaries’ services, over-investment in benefits to buyers, and a reduction in consumer surplus and sometimes welfare. Competition among intermediaries intensifies these problems by increasing the magnitude of their effects and broadening the circumstances in which they arise. We discuss applications to payment card systems, travel reservation systems, rebate services, and various other intermediaries.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics
Reference41 articles.
1. “Asymmetric Networks in Two-Sided Markets,”;Ambrus;American Economic Journal: Microeconomics,2009
2. “Intermediated Trade,”;Antras;Quarterly Journal of Economics,2011
3. “Competition in Two-Sided Markets,”;Armstrong;RAND Journal of Economics,2006
4. “Two-Sided Markets, Competitive Bottlenecks and Exclusive Contracts,”;Armstrong;Economic Theory,2007
5. “Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets,”;Baye;American Economic Review,2001
Cited by
92 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献