Should platforms be allowed to sell on their own marketplaces?
- Julian Wright
- Aug 7, 2020
- 1 min read
Updated: Jul 29, 2024
A growing number of platforms such as those run by Amazon, Apple and Google act
as sellers on their own marketplaces. But should they be allowed to operate in this dual mode? And how about imitating third-party seller's products and steering consumers to their own products?
In this article (together with my co-authors Andrei Hagiu and Tat-How Teh) we build a model of a platform that operates as a dual marketplace and seller in order to explore the implications of this practice, and the calls to ban it, taking into account the platform's optimal choice of mode. Our analysis shows that an outright ban benefi ts third-party sellers. Surprisingly, even after allowing for innovation by third-party sellers, and imitation and self preferencing by the platform, banning the dual mode can result in lower consumer surplus or lower total welfare. Policies that ban the imitation of highly innovative third-party products or self-preferencing by the platform generally lead to preferable outcomes to an outright ban on the dual mode.
You can read the full paper here.
This post about Amazon selling on its own marketplace really made me think. It seems tricky when a platform competes with the sellers it hosts. Small businesses and authors can be affected a lot. It also reminds me how important fair opportunities are for everyone, including top children's book publishers, so their books can reach readers without being overshadowed by bigger players.
This topic raises an important discussion about balance and fairness within digital marketplaces. When platforms sell on their own marketplaces, transparency and equal opportunity become critical for maintaining trust among sellers. Clear rules and visible separation between platform-owned products and third-party sellers can help protect competition. For brands using services like a tiktok shop automation agency, these policies matter because automated growth relies on predictable systems and fair exposure. Thoughtful regulation and open communication can encourage innovation while keeping the marketplace healthy. Articles like this help spark meaningful conversations that push platforms toward practices benefiting both businesses and consumers alike.