Job Market Paper
"Platform Search Design and Market Power" (pdf)
On the Amazon.com marketplace, both Amazon and small businesses compete in offering retail products. However, Amazon chooses what products consumers see when they search. Products sold by Amazon may have a better position compared to small business products, but the effects on consumers and sellers are unclear. Policymakers have expressed antitrust concerns about this, suspecting "self-preferencing" and "gatekeeper" market power. To study this, I develop a model where heterogeneous consumers search for differentiated products arranged on an acyclic graph (i.e., tree). Firms price in response to consumer search and how their products are arranged—highlighting how search design determines market structure. The model endogenizes consideration set formation and recovers the correlated distribution of consumer preferences and search costs. Estimated on Amazon data, I show that not accounting for product arrangement (e.g., search results and BuyBox) leads to incorrect price elasticity estimates. I provide three results on market power and antitrust policies using counterfactual product arrangements. (i) To isolate the effect of Amazon's position advantage, I remove it through a "neutral" product arrangement. Profits shift from Amazon to small businesses, confirming Amazon's sizable market power. However, consumer welfare falls when consumers reduce their search intensity in response to reduced value from searching. This suggests Amazon's incentives and consumers' preferences are aligned, weakening the claim of self-preferencing. (ii) Banning the platform owner from also being a seller reduces consumer welfare through price rather than product variety. (iii) I propose an alternate policy, splitting the platform into an Amazon side and a small-business side. Giving consumers the ability to search for and "support small businesses" would alleviate the market power imbalance without harming consumers.
Work in Progress
"Separating Equilibrium in Platforms Competing Over Search Design"
Competing retail platforms (such as Amazon and eBay) choose different ways of arranging the products shown to consumers. Why does this occur, and is there an optimal arrangement of products? I propose a model where consumers search through an acyclic graph (i.e., tree) to model a retail platform’s incentives to arrange products. I show that a monopoly platform may obfuscate search in equilibrium, using product arrangement to extract surplus from participants. However, under competing duopoly platforms, I show that pooling and separating equilibria are possible. In particular, there is a separating equilibrium where one platform groups similar products under intense price competition and the other platform does not, mirroring the observed search designs of Amazon and eBay. Search design is used to discriminate between consumers with different search costs. High search cost consumers prefer the platform that groups products as this minimizes searching, while low search cost consumers prefer the other platform since they can benefit from considering a wider range of products. The resulting pricing on each platform exhibits different dispersion that supports the separating equilibrium.