Seller curation in platforms

Abstract

This article explores why market platforms do not expel low-quality sellers when screening costs are minimal. I model a platform market with consumer search. The presence of low-quality sellers reduces search intensity, softening competition between sellers and increasing the equilibrium market price. The platform admits some low-quality sellers if competition between sellers is intense. Recommending a high-quality seller and this form of search obfuscation are complementary strategies. The low-quality sellers enable the recommended seller to attract many consumers at a high price and the effect of the recommendation is strengthened as low-quality sellers become more adept at imitating high-quality sellers.