R. da Matta
- Optimal Front Page Advertising
- Number of pages
- University of Illinois/University of Amsterdam/Higher School of Economics
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam Business School Research Institute (ABS-RI)
We consider a model of an on-line software market, where an intermediary distributes products from sellers to buyers. When products of sellers are vertically differentiated, an intermediary, earning a proportion of sales, has an incentive to hide the worse product on the second page, and only keep the better product on the front page: that weakens the competition, allowing the seller with the better product to charge a higher price. With heterogeneous visiting costs to the second page, the platform’s revenue might improve, but the outcome will become socially suboptimal.
- March 11, 2013
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