Seminar Vol. 180

Title:A Model of Sales of Online Platforms 

Speaker: Yangguang Huang, Hong Kong University of Science and Technology (HKUST)

Time: September 27th, 2019  13:30-14:45

Venue: Conference Room 106B, IESR, Zhonghui Building (College of Economics)

About the speaker:

Yangguang (Sunny) Huang is an Assistant Professor of Economics at the Hong Kong University of Science and Technology. He received his Ph.D. in Economics from the University of Washington in 2016. His research areas are Industrial Organization and Applied Microeconomics. The theme of his research is combining economic models and econometric techniques to study policy-oriented topics. His research projects tackle problems in procurement, public resource allocation, corruption, financial development, digital economy, and online markets.

Abstract:

One prominent feature of online sales is that buyers rely on search tools offered by platforms to process the tremendous amount of information in searching for products. We develop a model that formally introduce search algorithm into a two-sided market operated by an online platform. The platform not only charges fees but also control the search tool such as the search engine or the recommender system. The model captures how the search algorithm affects buyers' search process, which further influences the market equilibrium and welfare. Although the search algorithm may reduce buyer search costs and promote competition among sellers, there is an intrinsic conflict between the platform private interest and the public interest: The platform will choose an algorithm that is too selective from the social welfare perspective, which causes consumers on average consider less options and suppresses competition. Using data from food delivery platforms, we provide empirical evidence of several aspects of the model.