Monopoly Power in Platform Dominated Markets

This paper gives a representation of a platform-dominated market. We characterize a market where a vertically integrated sales platform compete downstream with a firm selling a smaller subset of goods. The platform owner and the down-stream firm compete through the price (quantity variable) and the delivery time (quality variable), We find that in equilibrium the demand for the competitor's good is more elastic than the platform owner's demand with respect to the delivery time and that competitor's consumers are more sensitive to changes in the delivery times rather than in the price. Furthermore, we find that when the platform owner's demand elasticity is sufficiently high, then it could partially discipline the market power the platform owner can exert against its downstream competitor. However, if the cross-price elasticity is significant as well, the platform owner is likely to un-dermine the strength of competition by raising the access price to its platform. [Publisher's Text].