Munich Personal RePEc Archive

Consumer naivete and competitive add-on pricing on platforms

Ghosh, Meenakshi (2021): Consumer naivete and competitive add-on pricing on platforms.

[thumbnail of MPRA_paper_109981.pdf]

Download (409kB) | Preview


We model a situation where two sellers trade vertically and horizontally differentiated goods on a platform for which they are charged a commission fee. Sellers' costs are asymmetric due to differences in the fees charged by the platform and in their costs of production. Consumers purchase either a base good, or a bundle comprising of the base good and an add-on, from one of the sellers on the platform. Consumers differ in their brand preferences, valuations of quality and in their levels of sophistication. More specifically, we assume that there is a fraction of consumers who are naive, and do not observe or consider add-on prices - possibly because they do not foresee their demand for an add-on - until after they have committed to buying the base good from a seller. We examine how the interplay of these forces shapes consumer behavior, sellers' pricing strategies and cost pass-through, and platform fees and revenues.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.