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Journal Article

Competing sales channels with captive consumers

The Economic Journal 132 (642): 741–766
David Ronayne, Greg Taylor (2022)
Economics, politics and business environment
JEL Code(s)
D43, D83, L11, M3
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 size influences market outcomes. A bigger CC means more consumers compare prices, increasing within-channel competition. However, such seemingly pro-competitive 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.
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