Analysis Of The Effect Of Cournot Competition Under The Platform Own Brands Model

In two-sided or multisided markets,the role of platforms on the participation of platform users is mainly reflected in the behavior of facilitating interactions among users.By signing different forms of agreements with users,platforms provide services for users and charge fees,so to attract users to participate in and maximize their profits.This paper mainly focuses on large-scale retail e-commerce platforms,by analyzing the development of the existing platforms at home and abroad,we can see that the large-scale retail e-commerce platform manufacturers not only have a super high market share and an absolutely dominant market position,but also start to launch their own brand as a retailer to participate in the competition of the platform’s retailers.The dual role of platforms make the impact of social welfare more complex.Currently the foreign antitrust law is also starting investigation on whether the large-scale retail platforms harm the competition.Therefore,the role economic analysis of platforms as both athletes and referees becomes more and more important.Based on Cournot model,this paper first analyzes large-scale retail e-commerce platform without its own brands,and considers that platform and retailers adopt two different arrangements:royalty and exclusive zone.By comparison we conclude that the arrangement of royalty can not only increase the profit level of platforms,but also bring higher consumer surplus and social welfare level.In view of the concern about whether the retailers have incentives for technological innovation under the monopoly situation,we find that no matter what kinds of agreement arrangement,the cost reduction brought by technological innovation can make the original high-cost retailers more competitive,and increase consumer surplus and platform’ profits.However,the progress of technology on social welfare is uncertain,which may improve or reduce the level of social welfare.Subsequently,this paper analyzes the situation when large platforms have own brands.On the one hand,the platforms can still charge the independent third party retailers through different forms of protocol arrangement,on the other hand,the platform itself also participates in the platform competition as a retailer.By comparing with the welfare level of the platform with or without own brands,we can draw the following conclusions:First,own brand is always the best choice for platforms.No matter the relative cost of self owned brand is high or low,platforms can always obtain higher profit level.Compared with the exclusive zone agreement,the platforms can get more profits only by using the form of royalty.Second,platform with own brands does not necessarily damage the interests of both small and medium-sized retailers.It depends on agreement arrangements and the cost of platform own brands.Only when the own brands have.a lower cost and adopt the form of royalty,it will lead to the squeeze out effect and damage the interests of small and medium-sized sellers.Third,platform with own brands may increase or reduce the level of social welfare.By comparing the social welfare,we can conclude that platforms have the lowest social welfare when they have not their own brands and adopt exclusive zone agreements.It may increase or reduce the level of social welfare,depending on different forms of agreement arrangements and the cost of their own brands relative to third-party retailers.Fourth,platform can still have incentives for technological innovation.Via our models we could see it could improve the platform profit level.In conclusion,in view of the conduct of own brands of large-scale retail platforms,when the antitrust authorities consider if it harms the competition,they should not only consider whether it will have an adverse impact on other platform retailers,but also comprehensively analyze the effect caused by platforms’ own brands.Therefore,when determining whether it’s necessary to carry out antitrust litigation against large-scale platforms,it is necessary to reasonably analyze the consequences of having own brands,consider the agreement arrangements between the platform itself and the retailer,and determine whether it ultimately damages the competition,rather than only having a negative impact on an economic entity,so as to further promote the orderly development of e-commerce platforms.