Is Ranking Advantage Equal to Market Power? —An Empirical Study of E-Commerce Platforms

Given that consumers’ ordered search and sales are concentrated on leading merchants on Internet platforms, this paper theoretically discusses and empirically tests the relationship between ranking position and merchants’ market power on Internet platforms. Top-ranked merchants do indeed have stronger pricing power, which reflects the importance of location competition in the online market. The market power of mid-ranked merchants may be weaker than that of bottom-ranked merchants because ranking position has the function of screening consumer preferences. Under the ordered search, bottom-ranked merchants face fewer consumers, but their demand preferences are more concentrated.