Abstract
The significant development of e-commerce and Internet marketplaces has provided numerous benefits to both retailers and customers. In addition, it has been a boon for delivery operators, allowing postal services to compensate at least in part revenue losses due to declining mail volumes. However, increasing concentration in e-commerce and the worry that market power may be extended into adjacent markets has turned into a major concern of policy makers and competition authorities. While many argue that traditional regulatory or competition policy may have to be amended within the context of platforms, there are so far few rigorous studies that can provide guidance.
We thank Tim Brennan, Yassin Lefouilli, Per Luigi Parcu, and Ed Pearsall for their insightful remarks and suggestions. We thank all the participants of the 27th Conference on Postal and Delivery Economics for their comments.
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Notes
- 1.
In France, for instance, Amazon bought a share of Colis Privé’s capital in 2014.
- 2.
In the economic literature, foreclosure is defined as the dominant firm’s denial of proper access to an essential good it produces, with the intent of extending monopoly from that segment to an adjacent segment (Rey and Tirole 2007).
- 3.
Ordover et al. (1990) study issues that are similar to ours and some of their intuitions also apply in our model. However, within their setting the input supplied in the upstream market is homogenous. In other words even absent of integration in their setting, there are only two variants of the product; consumers do not care about which upstream firm provides the input. This turns out to have a drastic impact on the result for in their setting mergers emerge only under commitment (see their Section C), while in our setting no commitment is necessary.
- 4.
Which occurs when different variants of a product or service are offered to accommodate differences in tastes
- 5.
The distribution function of the double exponential distribution is \( F(x)=\exp \left(-\exp \left(-\frac{x}{\sigma}\right)\right) \).
- 6.
When the distribution of x is given by \( F(x)=\exp \left(-\exp \left(-\frac{x}{\sigma}\right)\right) \), a smaller σ means that there is a larger probability of x exceeding a given threshold. This can be interpreted as the products supplied being closer substitutes.
- 7.
In that case expression (1) becomes
$$ {D}_{ij}\left(\mathrm{p}\right)=\frac{\exp \left(-\frac{p_{ij}}{\sigma}\right)}{\sum \limits_{i=1,2}\sum \limits_{j=A,B}\exp \left(-\frac{p_{ij}}{\sigma}\right)+\exp \left(-\frac{p_0}{\sigma}\right)} $$and the subsequent expressions have to be amended in a straightforward way.
- 8.
When retailers move first, consumer price are given; demand does not depend on delivery rates; and the operator’s problem is not well defined.
- 9.
We have \( {D}_A\left({\mathrm{p}}^{FA}\right)=\frac{\exp \left(-\frac{p_A}{\sigma}\right)}{\exp \left(-\frac{p_A}{\sigma}\right)+\sum \limits_{i=1,2}\exp \left(-\frac{p_{iB}}{\sigma}\right)}, \) and \( {D}_{iB}\left({\mathrm{p}}^{FA}\right)=\frac{\exp \left(-\frac{p_{iB}}{\sigma}\right)}{\exp \left(-\frac{p_A}{\sigma}\right)+\sum \limits_{i=1,2}\exp \left(-\frac{p_{iB}}{\sigma}\right)} \) for i = 1, 2.
- 10.
We have \( {D}_{iA}\left({\mathrm{p}}^{FA}\right)=\frac{\exp \left(-\frac{p_{iA}}{\sigma}\right)}{\exp \left(-\frac{p_B}{\sigma}\right)+\sum \limits_{i=1,2}\exp \left(-\frac{p_{iA}}{\sigma}\right)} \) and \( {D}_B\left({\mathrm{p}}^{FA}\right)=\frac{\exp \left(-\frac{p_B}{\sigma}\right)}{\exp \left(-\frac{p_B}{\sigma}\right)+\sum \limits_{i=1,2}\exp \left(-\frac{p_{iA}}{\sigma}\right)} \).
- 11.
Demand functions are given by \( {D}_A\left({\mathrm{p}}^F\right)=\frac{\exp \left(-\frac{p_A}{\sigma}\right)}{\exp \left(-\frac{p_A}{\sigma}\right)+\exp \left(-\frac{p_B}{\sigma}\right)}, \) and \( {D}_B\left({\mathrm{p}}^F\right)=\frac{\exp \left(-\frac{p_B}{\sigma}\right)}{\exp \left(-\frac{p_A}{\sigma}\right)+\exp \left(-\frac{p_B}{\sigma}\right)}. \)
- 12.
As mentioned above, the scenarios without outside option yielding a fully covered market are not suitable to study welfare effects. Due to space constraints, we omit them but they can be found in an earlier working paper version; see Borsenberger et al. (2019).
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Borsenberger, C., Cremer, H., Joram, D., Lozachmeur, JM., Malavolti, E. (2020). Platform Competition: Market Structure and Pricing. In: Parcu, P.L., Brennan, T.J., Glass, V. (eds) The Changing Postal Environment. Topics in Regulatory Economics and Policy. Springer, Cham. https://doi.org/10.1007/978-3-030-34532-7_17
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