Author(s)

KaiHua Bao^1*, ZhiQiang Zhang², Ting Zhang¹

Affiliation(s)

¹Research Institute of Machinery Industry Economic & Management, Beijing 100055, China.

²School of Economics and Management, University of Science and Technology Beijing, Beijing 100083, China.

Corresponding Author

KaiHua Bao

ABSTRACT

Increasingly, e-commerce platforms like Amazon and JingDong serve not just as intermediary markets that facilitate transactions between third-party sellers and consumers but also function as sellers themselves, offering their self-operated products on their platforms. When platforms commence selling their self-operated products, they may replicate the offerings of third-party sellers or engage in self-preferential practices favoring their own products. Consequently, it is essential to investigate the market equilibrium and welfare implications of platforms' dual mode, and evaluate whether such the dual mode should be banned. This paper examines the equilibrium of platforms according to the Hotelling model across three operation modes: the pure marketplace mode, the pure seller mode, and the dual mode. Furthermore, we examine the selection of modes for platforms. Additionally, we investigate the welfare, profits of platforms, and social welfare in the context of banning the dual mode of platforms. Finally, we briefly examine the contemporary policy implications of platforms' dual mode. The findings indicate that: (i) the dual mode of platforms is advantageous for consumers, platforms, and social welfare; (ii) platforms may intrinsically implement the dual mode for profit maximization; (iii) When platforms are banned from the dual mode and their choices of operation modes are endogenous, they will choose the pure marketplace mode; (iv) Consumer surplus, profits of platforms and social welfare decrease in the ban the dual mode of platforms.

KEYWORDS

Digital platforms; Dual mode operation; Self-preferencing; Competitive strategies

CITE THIS PAPER

KaiHua Bao, ZhiQiang Zhang, Ting Zhang. Should digital platforms be banned from the dual mode operation? World Journal of Economics and Business Research. 2025, 3(3): 28-38. DOI: https://doi.org/10.61784/wjebr3052.

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