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Private labels in marketplaces

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  • Shopova, Radostina

Abstract

Regulators are concerned that by introducing their own private labels, dominant online marketplace operators distort competition in their own favor. This paper addresses this concern by studying how online marketplaces differ from classic retailers with a wholesale arrangement. In online marketplaces individual sellers set their own consumer prices, while the marketplace operator collects fees from their sales. I show that when introducing a private label, the marketplace operator does not have an incentive to distort competition and foreclose the outside seller. On the contrary, when introducing a private label, there is an incentive to decrease the fee charged to the outside seller and to vertically differentiate its own product in order to protect the seller’s channel. However, relative to the wholesale model of classic retailers, online marketplace operators offer a lower quality with higher consumer prices, leading to less improvement in consumer surplus and potentially less harm to the outside seller.

Suggested Citation

  • Shopova, Radostina, 2023. "Private labels in marketplaces," International Journal of Industrial Organization, Elsevier, vol. 89(C).
  • Handle: RePEc:eee:indorg:v:89:y:2023:i:c:s0167718723000309
    DOI: 10.1016/j.ijindorg.2023.102949
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    Cited by:

    1. Federico Etro, 2024. "e‐Commerce platforms and self‐preferencing," Journal of Economic Surveys, Wiley Blackwell, vol. 38(4), pages 1516-1543, September.

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    More about this item

    Keywords

    Online Marketplaces; Private Labels; Vertical Relations; Agency; Wholesale; Vertical Differentiation;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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