will give a presentation on
Abstract:
Peer-to-peer (P2P) markets, such as Uber and AirBnB, allow consumers to find suitable small and independent service providers. In doing so, platforms that manage P2P markets indirectly compete with established traditional providers.
Building on Einav et al. (2016), I develop a model of competition between a platform and a traditional firm and look for the equilibrium prices and level of investment by the vertically integrated traditional incumbent. Specifically, firms compete à la Hotelling for consumers but, while the platform just needs to attract sufficient peer suppliers to match the number of customers, the standard firm relies on a fixed supply that it accumulated by investing in a previous stage of the game.
I show that when the traditional firm faces a supply constraint, it charges a higher price, and the platform can exploit this to charge in turn a higher price too and make a higher margin.