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The Economics Of Amazon

By  |  December 29, 2022

By Federico Etro, Florence School of Economics and Management.

We survey the literature on the economics of eCommerce with particular emphasis on the antitrust debate about Amazon. The business model of such a hybrid marketplace is based on monetization through referral fees on third party sellers hosted on the platform and direct margins on own products. Recent theoretical and empirical contributions allow one to analyze the welfare impact of the dual mode of Amazon and of recommendation algorithms that have been associated with self-preferencing strategies. The trade offs are complex and one cannot easily conclude that Amazon entry is biased to expropriate third party sellers or that a ban on dual mode, self-preferencing or copycatting would benefit consumers.

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