This paper examines the role of online intermediaries in influencing consumers' purchasing decisions by giving preferential treatment to certain retailers. We investigate the incentives of intermediaries to employ a ``competition for prominence scheme'', analyzing the impact on retailer strategies and consumer surplus. We show that, for a given fee, three alternative equilibria can emerge, two of which result in one retailer making no sale. We also find that intermediaries have a strategic interest in inducing intense competition between retailers by selecting one excluding equilibrium where double marginalization issues are mitigated and overall demand is maximized. We show that in equilibrium, the interests of the intermediary and the consumers are fully aligned. Finally, this scheme is always more profitable for the intermediary than auction-based alternatives as it replicates multiproduct monopolistic outcomes.
Online platforms that implement reputation mechanisms usually prevent the transfer of ratings to other platforms, leading to lock-in effects and high switching costs for users. This situation can be capitalized by platforms, for example, by charging their users higher fees. In this paper, we theoretically and experimentally investigate the effects of platformpricing on workers’ switching behavior in online labor markets and analyze whether a policy regime with reputation portability could mitigate lock-in effects and reduce the likelihood of worker capitalization by the platform. We further examine switching motives more thoroughly and differentiate between monetary motives and fairness preferences. Theoretically, we provide evidence for the existence of switching costs if reputation mechanisms are platform-specific. The model predicts that reputation portability lowers switching costs, eliminating the possibility for platforms to capitalize lock-in effects. We test our predictions using an online lab-in-the-field experiment. The results are in line with our theoretical model and show that the absence of reputation portability leads to worker lock-in, which can be capitalized by platforms. Moreover, reputation portability has a positive impact on the wages of highly rated workers. The data further show that the switching of workers is primarily driven by monetary motives, but perceiving the platform fee as unfair also plays a significant role for workers.
Works in Progress
Manipulating Perceived Product Differentiation
This paper investigates the intermediary's ability to manipulate consumers' perception of product differentiation between two firms. The intermediary has the ability to decrease transportation costs for the favored firm while increasing them for its competitor. Our findings indicate that an increase in relative differentiation is advantageous for both total industry profits and consumers, albeit at the expense of the disadvantaged firm. However, the degree to which consumers benefit from this relative differentiation depends on the intermediary's chosen monetization strategy: in some instances, the intermediary may capture all the benefits, reducing consumers' surplus.
Privacy as a competition tool