Seller curation in platforms |
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| Institution: | 1. Department of Economics, Università Bocconi, Italy;2. CSEF, Italy;3. CEPR, UK;4. ICREA-Universitat Pompeu Fabra and Barcelona Graduate School of Economics, Spain;1. University of Colorado Boulder, Boulder, CO, United States;2. Lingnan University, Tuen Mun, Hong Kong;1. Management School, University of Liverpool, Chatham Street, Liverpool L69 7ZH, United Kingdom;2. Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, United Kingdom;3. Düsseldorf Institute for Competition Economics (DICE), Germany |
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| Abstract: | This article explores why market platforms do not expel low-quality sellers when screening costs are minimal. I model a platform market with consumer search. The presence of low-quality sellers reduces search intensity, softening competition between sellers and increasing the equilibrium market price. The platform admits some low-quality sellers if competition between sellers is intense. Recommending a high-quality seller and this form of search obfuscation are complementary strategies. The low-quality sellers enable the recommended seller to attract many consumers at a high price and the effect of the recommendation is strengthened as low-quality sellers become more adept at imitating high-quality sellers. |
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