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Hybrid platform model: monopolistic competition and a dominant firm

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  • Simon Anderson
  • Özlem Bedre Defolie

Abstract

We model a platform controlling the variety and prices of the products it hosts via a percentage fee on sellers and choosing whether to sell its own products (hybrid mode). We derive a mixed market demand system for differentiated products with monopolistically competitive sellers and a sizeable platform product range. The hybrid platform steers consumers toward its products by charging higher seller fees than pure marketplace. This “insidious steering” intensifies the larger the platform's product footprint. Hybrid mode harms consumers compared to pure marketplace unless fringe entry is sufficiently inelastic.

Suggested Citation

  • Simon Anderson & Özlem Bedre Defolie, 2024. "Hybrid platform model: monopolistic competition and a dominant firm," RAND Journal of Economics, RAND Corporation, vol. 55(4), pages 684-718, December.
    • Handle: RePEc:bla:randje:v:55:y:2024:i:4:p:684-718
    DOI: 10.1111/1756-2171.12478
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