Borsenberger, Claire, Cremer, Helmuth, Lozachmeur, Jean-Marie and Malavolti-Grimal, Estelle (2020) Platform competition: market structure and pricing. In: The Changing Postal Environment: Market and Policy Innovation Springer. Series “Topics in Regulatory Economics and Policy” pp. 225-240. ISBN 978-3-030-34532-7

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Abstract

AbstractWe consider an e-commerce sector with two retailers (which may be marketplaces)and two delivery operators. Products are di§erentiated according to the retailer andthe mode of delivery. The representation of product di§erentiation is inspired by theAnderson, De Palma and Thisse (2002) discrete choice model.We examine vertical integration of a retailer/ delivery operator pair. Vertical re-straints like bundling and/or foreclosure are then considered on top of the integration.Vertical integration in itself eliminates double marginalization, which enhances con-sumersíwelfare. On the other hand, it reduces product variety, and the market powerit conveys is likely to reduce proÖts of the remaining Örms. Bundling or foreclosure canbe expected to further exacerbate these negative e§ects.Our most remarkable result is that vertical integration of a single retailer/operatorpair will lead to bundling and foreclosure, and possibly the complete exit of the remain-ing retailers and operators. This is true even when no explicit bundling or foreclosureis put in place on ana prioribasis. Consequently, a competition authority that isconcerned with total welfare, should not allow the initial merger.

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