First-Party Selling and Self-Preferencing

In this paper, I analyze the consumer welfare effect of a vertically-integrated gatekeeper platform selling its own, first-party (1P) product (1P selling) as well as the platform's incentive to favor the 1P product in its product recommendations (self-preferencing). 1P selling allows the platform to sell directly to consumers, mitigating double marginalization, but it also enables the the platform to foreclose third-party (3P) competitors upstream. I show that under self-preferencing the platform reduces commission fees sufficiently for consumers to benefit from lower prices. Hence, consumer welfare is higher under 1P selling regardless of self-preferencing. What is more, the platform itself is better off if it commits not to engage in self-preferencing, as without self-preferencing 1P selling raises upstream competition, thus constituting an effective remedy for double marginalization.