EXPRESS: Does Amazon’s Dual Role Weaken Marketplace Competition?

Abstract

Amazon’s dual role, as both marketplace owner and first-party (1p) seller, gives it power over third-party (3p) sellers who sell similar items. This dual role can weaken 3p sellers’ ability to compete, possibly harming 3p sellers and consumers. We examine three aspects of marketplace competition. First, we examine price change dependencies. We find that 1p price drops after either higher Buy Box (i.e., the Add to Cart or default sales box on Amazon’s product page) prices or large 3p price increases; 3p prices decrease subsequently. Second, we analyze Buy Box seller selection since this is a critical conduit for demand. We find both high 1p and 3p prices are penalized in Buy Box selection. Low-reputation and intermittent 3p sellers cannot win Buy Box even at significantly lower prices. At equal prices, for some prices, Buy Box favors 1p over equal-priced 3p, and vice versa for others. Third, to see whether entry barriers weaken competition, we estimate a 3p seller entry model. Higher 1p prices are associated with more 3p sellers, suggesting low entry barriers. Combined, our results suggest Amazon’s dual role does not weaken competition in the marketplace. We discuss implications for marketplace participants, antitrust policy and research.