Visibility policy, seller incentives, and pricing dynamics in a digital goods marketplace
Abstract/Contents
- Abstract
- There has been rapid growth in digital goods platform-marketplaces such as the Apple App Store or Google Play store, partially driven by low barriers to entry for new and entrepreneuring developers looking to sell their products. These small and independent sellers rely on marketplace mechanisms for product discovery in the absence of the means or ability to advertise. App store markets frequently link visibility and discovery to historical sales: top selling products are featured more prominently on frontpage and search results. Similar mechanisms are present in many online store contexts. Yet, their impact on marketplace outcomes has largely been understudied in the literature. This research aims to bridge this gap using data from a large app store-like marketplace to examine the implications of this common marketplace visibility policy. I present a model in which the visibility policy is internalized by sellers in their pricing decisions and incorporate rich institutional details from the marketplace to aid in estimation. Using this model, I show that marketplace policy leads sellers to compete for visibility by adopting strategies of lowered introductory pricing. The widespread use of introductory pricing strategies leads to inefficient pricing from an aggregate perspective, reducing seller revenue and thereby the marketplace operator's revenue share. This issue can be thought of as a form of channel conflict from the perspective of the marketplace operator, whereby the operator in the role of the wholesaler would like to enforce a higher price level but is thwarted by seller (retailer) competition for visibility. I evaluate a mitigation strategy the marketplace operator could pursue - ranking products by revenue rather than sales quantity - through counterfactual simulation and find that the marketplace operator could increase revenue 13% by switching ranking algorithms, though at the cost of consumer welfare and among other implications.
Description
| Type of resource | text |
|---|---|
| Form | electronic resource; remote; computer; online resource |
| Extent | 1 online resource. |
| Place | California |
| Place | [Stanford, California] |
| Publisher | [Stanford University] |
| Copyright date | 2018; ©2018 |
| Publication date | 2018; 2018 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Author | Huang, Justin Tsai |
|---|---|
| Degree supervisor | Narayanan, Sridhar, 1970- |
| Thesis advisor | Narayanan, Sridhar, 1970- |
| Thesis advisor | Johari, Ramesh, 1976- |
| Thesis advisor | Nair, Harikesh S. (Harikesh Sasikumar), 1976- |
| Degree committee member | Johari, Ramesh, 1976- |
| Degree committee member | Nair, Harikesh S. (Harikesh Sasikumar), 1976- |
| Associated with | Stanford University, Graduate School of Business. |
Subjects
| Genre | Theses |
|---|---|
| Genre | Text |
Bibliographic information
| Statement of responsibility | Justin Tsai Huang. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis Ph.D. Stanford University 2018. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2018 by Justin Tsai Huang
Also listed in
Loading usage metrics...