Thursday, July 15, 2021

On Sellers' Collusion in E-Commerce Marketplaces

On Sellers' Collusion in E-Commerce Marketplaces

Michele Bisceglia

University of Bergamo - Department of Management, Economics and Quantitative Methods; University of Toulouse 1 - Toulouse School of Economics (TSE)


Motivated by a recent competition policy debate on retailers' collusion in online marketplaces, this paper studies a simple model to shed light on the competitive and welfare effects of this conduct. I find that, when retailers sell their products through a monopolistic e-commerce platform, consumers are not necessarily harmed by their collusive behaviour. Specifically, if the platform adopts the agency model and is vertically integrated (i.e., sells a private label in competition with third-party sellers), a cartel between third-party sellers induces it to charge them lower fees and to set a lower price for its private label. As a consequence, when products are sufficiently homogeneous, also the cartel members charge lower prices compared to the non-cooperative equilibrium, and collusion benefits consumers and increases total welfare. Notably, these results hold even though the platform has all the bargaining power vis-à-vis (competing or colluding) third-party sellers, and they collude explicitly.

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