Benjamin Edelman, Julian Wright, Jan 30, 2015
In connecting buyers to sellers, some two-sided platforms require that sellers offer their lowest prices through the platform, disallowing lower prices for direct sales or sales through competing platforms. In this article, we explore the various contexts where such restrictions have arisen, then consider effects on competition, entry, and efficiency. Where there are plausible mitigating factors, such as efficiencies from platforms’ price restrictions, we explore those rationales and compare them to the harms. We identify a set of responses for competition policy, look at experiences to date, and suggest some future attempts to improve the functioning of these markets.