Electronic Platforms in a Consumer Search Model

We use a search model to study how the outside market affects the inside market. Consumers look for price and match information through either a costly sequential search or a monopoly platform, which chooses the number of inside firms. Our analysis finds an equilibrium where each consumer visits the platform first. The number of firms chosen by the platform is inversely related to search cost, due to the presence of two opposing effects: the competition-intensifying effect and the market-expansion effect. The same pattern arises when several competing stores in the platform choose the number of firms.