Yao LiFollow

Graduation Year

2020

Date of Submission

5-2020

Document Type

Campus Only Senior Thesis

Award

Robert Day School Prize for Best Senior Thesis in Economics and Finance

Degree Name

Bachelor of Arts

Department

Mathematics

Second Department

Economics

Reader 1

Darren Filson

Reader 2

Susan Martonosi

Rights Information

@2020 Yao Li

Abstract

This paper focuses on platforms competing with their sellers and investigates the impact of antitrust policies on market welfare. I provide a game-theoretical model to analyze the present values of three parties: a platform, a seller, and several consumers. The seller can either use the platform or not. If it does, the platform can decide whether to enter and compete in the seller's market. Through the best response functions, the equilibrium conditions, and the welfare outcomes, I find that the firm chooses to join the platform when the cost is lower than the net benefit of the additional consumers brought on by the platform. The platform decides to compete in the product space when the benefit to compete outweighs the cost. When the platform enters the product space and competes with the firm, the firm cannot do better than when the platform is out. Consumer surplus is highest when both the platform and the firm provide products. Imposing potential policy interventions using two scenarios, I conclude that regulatory interventions may not always improve the total market surplus. The effect of the policies greatly depends on how much business the platform takes from the firm when competing, while the social welfare does not depend on it at all.

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This thesis is restricted to the Claremont Colleges current faculty, students, and staff.

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