Abstract

We study when and how the host organization of multiple sellers, such as a shopping mall, should subsidize or charge customers. Each seller provides a different product, sets her own price, and shares profit with the host according to their bargaining power. Equilibrium subsidy is indeed a multi-seller phenomenon. More bargaining power of the host relative to any seller, a less elastic demand for any seller, or a large cross-price elasticity of demand for the host favors a subsidy. Regardless, the host always charges a fee if the sum of the profit shares taken from sellers does not exceed 1.

Link to paper:
ssrn.com/abstract=2911722

Link to webpage:
www.nuffield.ox.ac.uk/people/profiles/ming-gao