Online intermediation in legacy industries: The effect of reservation platforms on restaurants’ prices and survival.

Abstract

We study the impact of increasing online intermediation in legacy industries. We motivate the empirical analysis with a duopoly model where an intermediary platform enables firms to attract consumers from competitors by offering them higher benefits. We show the intermediary can induce firm to join, even when they cannot expect benefits from joining. Additionally, as the popularity of the platform raises, it can extract a growing proportion of the benefits it creates. The analysis focuses on restaurants’ adoption of OpenTable in New York City. Results support the model predictions of cost pass-through to consumers of fees charged to restaurants, and no effect of adoption on restaurant survival.
See below for working paper and video of presentation at the StartML Workshop @ NeurIPS’21

Publication
Manuscript.
Date