Pricing of delivery services and the emergence of marketplace platforms

Borsenberger, Claire, Cremer, Helmuth, Joram, Denis and Lozachmeur, Jean-Marie (2016) Pricing of delivery services and the emergence of marketplace platforms. TSE Working Paper, n. 16-686

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Official URL: http://tse-fr.eu/pub/30650

Abstract

This paper studies the pricing of delivery services and its impact on the market structure in the-commerce sector. We focus on one of the ongoing trends, namely the development of marketplaces. A retailer may not just sell its own products; but also provide a marketplace for other sellers, offering a variety of services including delivery. Marketplaces create a "secondary" market which undermines the delivery operator's abilityto differentiate prices. We study the subgame perfect equilibrium of a sequential game with two operators where retailer 0 may potentially develop a marketplace. The delivery operator and retailer 0 bargain over the delivery rate. Then, retailer 0 chooses the per-unit rate and the fixed fee at which it is willing to sell its delivery service to the other retailer. Finally, retailer 1 chooses its delivery option: either it directly patronizes the independent delivery operator, or it uses the services offered by the marketplace, and the corresponding subgame is played. Analytical results are completed by numerical simulations and lead to three main lessons. First the equilibrium nearly always implies a discount to the "leading" retailer, even when the profit maximizing operator has all the bargaining power. Second, the delivery operator cannot avoid the emergence of a marketplace even though this decreases its profits. Third, the market power of the delivery operator cannot be assessed solely by considering its market share.

Item Type: Monograph (Working Paper)
Language: English
Date: August 2016
Uncontrolled Keywords: E-commerce, parcel delivery, marketplace, pricing and market structure, price discrimination
JEL codes: L1 - Market Structure, Firm Strategy, and Market Performance
L5 - Regulation and Industrial Policy
L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 30 Aug 2016 15:19
Last Modified: 20 Nov 2018 12:38
OAI ID: oai:tse-fr.eu:30650
URI: http://publications.ut-capitole.fr/id/eprint/22333

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