Competing Sales Channels

Mar 2019 | 843

Authors: David Ronayne Greg Taylor


We study strategic interactions in markets where firms sell to consumers both directly and via a competitive channel (CC), such as a price comparison website or marketplace, where multiple sellers’ offers are visible at once. We ask how a CC’s relative size influences market outcomes. A bigger CC means more consumers compare prices, increasing within-channel competition. However, such seemingly procompetitive developments can raise prices and reduce consumer surplus by weakening between-channel competition. We also use the model to study relevant active policy issues including price clauses, integrated ownership structures, and access to consumers’ purchase data.

Revised March 2019

JEL Codes: JEL D43, D83, L11, M3

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