Abstract: In this paper, I study competition between large sellers operating on a two-sided platform. The traditional analysis of seller competition on platforms assumes ‘naive’ firms that do not internalise the impact of their decisions on the number of buyers that enter the platform. With an exogenous number of sellers, I study seller incentives on the platform with large ‘sophisticated’ sellers, who internalise the effect of their choices on buyer entry. I show that the analysis with naive sellers may underestimate buyer entry and platform profits, while overestimating product prices. I also show that an introduction of the platform’s own product benefits consumers at the expense of third-party sellers, due to a higher commission rate on third-party sellers and lower product prices for consumers.
Coauthor(s): Flavio Toxvaerd
Abstract: We analyse an overlapping generations model of manufacturer certification in durable goods markets with asymmetric information about the quality of used goods. The functioning of second-hand markets has two effects on markets for new goods, a substitution and a resale value effect. Through certification, manufacturers reduce adverse selection in second-hand markets and extract resulting rents through the markets for new goods. Certification may increase profits at the expense of social welfare, by increasing average quality while decreasing trading volume. Manufacturers may be willing to subsidise certification to increase profits on new goods and thus have an advantage over third-party certifiers.
Coauthor(s): Flavio Toxvaerd, Yi Wei
Abstract: This paper studies an infinite horizon dynamic quantity-setting duopoly model in which firms producing perfectly non-perishable goods face endogenous intertemporal capacity constraints. In each period, firms compete in quantities under capacity constraints and the remaining stock (if any) remains available in the following periods. This paper shows that under different levels of capacity constraints, the critical values of discount factor that sustain collusion differ. By introducing intertemproal capacity constraints, we show that there exists subgame perfect equilibria when firms hold excess capacity along the collusive path and firms' collusive behaviours are affected non-monotonically by the level of excess capacity that they hold along the collusive path.