The welfare effects of platform self-preferencing in the ancillary market

We examine the implications of a monopoly platform operating in the primary market while competing with a third-party firm in ancillary markets and engaging in self-preferencing. Self-preferencing arises only when the platform exhibits strong dominance in the ancillary market. When considering bias in two-sided network exposure, we find that although self-preferencing consistently reduces buyer surplus, its effects on seller surplus and total welfare are ambiguous. Notably, these welfare outcomes depend on the extent of the conglomerate’s dominance in the ancillary market: seller and total welfare may increase when dominance lies within an intermediate range, a condition that partly aligns with the conglomerate’s incentive to engage in self-preferencing.