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Product Recommendations and Price Parity Clauses

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  • Martin Peitz
  • Anton Sobolev

Abstract

A seller can offer an experience good directly to consumers and indirectly through an intermediary. When selling indirectly, the intermediary provides recommendations based on the consumer’s match value and the prices at which the product is sold. The intermediary faces the trade-off between extracting rents from consumers who strongly care about the match value versus providing less informative recommendations but also serving consumers who do not. We analyze the allocative and welfare effects of prohibiting price parity clauses and/or regulating the intermediary’s recommender system. Prohibiting price parity clauses is always welfare decreasing in our model.

Suggested Citation

  • Martin Peitz & Anton Sobolev, 2024. "Product Recommendations and Price Parity Clauses," CRC TR 224 Discussion Paper Series crctr224_2024_595, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2024_595
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp595
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    References listed on IDEAS

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    1. Belleflamme, Paul & Peitz, Martin, 2021. "The Economics of Platforms : Concepts and Strategy," LIDAM Reprints CORE 3185, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Andrei Hagiu & Tat‐How Teh & Julian Wright, 2022. "Should platforms be allowed to sell on their own marketplaces?," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 297-327, June.
    3. Alexandre de Cornière & Greg Taylor, 2019. "A model of biased intermediation," RAND Journal of Economics, RAND Corporation, vol. 50(4), pages 854-882, December.
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    Cited by:

    1. Martin Peitz, 2024. "The Economic Theory of Two-Sided Platforms," CRC TR 224 Discussion Paper Series crctr224_2024_584, University of Bonn and University of Mannheim, Germany.

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    More about this item

    Keywords

    intermediation; digital platforms; price parity; recommender system; MFN clause; e-commerce;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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