Subject. The article discusses the penetration of platform technologies into markets, which results in changes in their structure and the nature of competition between participants, and leads to a redistribution of total wealth between producers and consumers of goods. Moreover, traditional market models can give incorrect estimates of equilibrium parameters, since they do not consider the specifics of pricing mechanisms used by platforms. Objectives. The study aims to assess redistribution of wealth caused by a change in the pricing mechanism from the classical market to the algorithmic one, using the Nash solution, determine the conditions under which the use of this mechanism can lead to an increase in the well-being of market participants. Methods. I apply methods of systems analysis, mathematical modeling, the theory of imperfect competition, and the game theory. Results. The study shows that, depending on the structure of the market, determined by the ratio of the number of sellers and buyers, net social losses in algorithmic pricing can be both higher and lower, compared to market equilibrium. With a small number of sellers, the use of algorithmic pricing leads to lower product prices and an increase in public welfare. However, with an increase in the number of sellers, this advantage disappears and the algorithmic mechanism leads to prices close to market equilibrium in an oligopolistic market. Conclusions. The use of digital platforms turns out to be expedient from the point of view of reducing net social losses in markets characterized by a high degree of monopolization. In this case, the mediation of the digital platform restricts the price limit, preventing manufacturers from setting a monopoly price for their products. In markets with a large number of sellers and buyers, the effects of algorithmic pricing are less pronounced. However, in this case, the efficiency of the market is increased by reducing the transaction costs of searching for information about potential counterparties.
Keywords: two-sided oligopoly, algorithmic pricing, digital platform, market equilibrium, public welfare
References:
Kolesnik G.V., Rybakov M.B. [Mathematical model of fixed assets’ joint use by the machine-building enterprises]. Ekonomika i matematicheskie metody = Economics and Mathematical Methods, 2021, vol. 57, no. 4, pp. 96–107. (In Russ.) URL: Link
Sinitsyn S.A., D'yakonova M.O., Bagryanskaya P.D. [Setting of prices for passenger and baggage transportation by a passenger taxi]. Predprinimatel'skoe pravo =Entrepreneurial Law, 2021, no. 4, pp. 44–51.
Podsorin V.A., Komarov V.A. [Fundamentals of dynamic pricing in the industry of freight transportation on the railway transport]. Transportnoe delo Rossii = Transport Business of Russia, 2023, no. 1, pp. 68–72. (In Russ.)
Cheremnykh A.A. [Analysis of factors influencing the pricing of air tickets]. Prikladnaya matematika i voprosy upravleniya = Applied Mathematics and Control Sciences, 2022, no. 1, pp. 196–213. (In Russ.) URL: Link
Markova O.A. [Airports as platforms: Consequences for antitrust policy]. Voprosy teoreticheskoi ekonomiki, 2023, no. 3. (In Russ.) URL: Link
Sungatullina L.B., Islamova L.Kh. [Objective prerequisites for price changes in the wholesale electricity market of Russia]. Bukhgalterskii uchet v byudzhetnykh i nekommercheskikh organizatsiyakh = Accounting in Budgetary and Non-Profit Organizations, 2023, no. 9, pp. 2–9. (In Russ.)
Filippova A.V. [Global trends in the development of the global electricity market amidst the transition to renewable energy sources]. Ekonomika, predprinimatel'stvo i pravo = Journal of Economics, Entrepreneurship and Law, 2023, vol. 13, no. 9, pp. 3413–3426. (In Russ.) URL: Link
Shvets N.N., Filippova A.V. [Methodological approach to estimation of efficiency of union of electricity markets of countries of the Eurasian Economic Union]. Audit i finansovyi analiz = Audit and Financial Analysis, 2018, no. 1, pp. 421–437. URL: Link (In Russ.)
Armstrong M. Competition in Two-Sided Markets. RAND Journal of Economics, 2006, vol. 37, iss. 3, pp. 669–691. URL: Link
Armstrong M., Wright J. Two-Sided Markets, Competitive Bottlenecks and Exclusive Contracts. Economic Theory, 2007, vol. 32, iss. 2, pp. 353–380. URL: Link
Rochet J.-C., Tirole J. Platform competition in two-sided markets. Journal of the European Economic Association, 2003, vol. 1, iss. 4, pp. 990–1029. URL: Link
Hagiu A. Two-Sided Platforms: Product Variety and Pricing Structures. Journal of Economics & Management Strategy, 2009, vol. 18, iss. 4, pp. 1011–1043. URL: Link
Horn H., Wolinsky A. Bilateral Monopolies and Incentives for Merger. RAND Journal of Economics, 1988, vol. 19, iss. 3, pp. 408–419. URL: Link
Antipin D.M., Sadovskaya T.G. [Multisided industrial platform general theoretical pricing modeling]. Ekonomika i predprinimatel'stvo = Journal of Economy and Entrepreneurship, 2017, no. 8, pp. 864–871. (In Russ.)
Maiorov S.I. [Is an Automated Market Maker an Alternative to Fiat Trading Protocols?]. Ekonomicheskaya politika = Economic Policy, 2022, vol. 17, no. 6, pp. 112–139. URL: Link (In Russ.)
Egorova M.A., Petrov A.A., Kozhevina O.V., Mikheeva I.E. [Prerequisites for the antimonopoly regulation of commodity markets in conditions of expansion of digital instruments of pricing and business model transformation]. Predprinimatel'skoe pravo = Entrepreneurial Law, 2021, no. 1, pp. 43–52. (In Russ.)
Binmore K., Rubinstein A., Wolinsky A. The Nash Bargaining Solution in Economic Modelling. RAND Journal of Economics, 1986, vol. 17, iss. 2, pp. 176–188. URL: Link_ Solution_In_Economic_Modelling
Naylor R.A. Industry profits and competition under bilateral oligopoly. Economics Letters, 2002, vol. 77, iss. 2, pp. 169–175. URL: Link00107-6
Nocke V., Peitz M., Stahl K. Platform Ownership. Journal of the European Economic Association, 2007, vol. 5, iss. 6, pp. 1130–1160. URL: Link