Firms entrance on ranking platforms

The paper shows that the entrance of new firms on ranking platforms with ordered consumer's search (e.g., Amazon and Google) can lead to an increase in the price charged by firms already presented on the market, despite increased market competition. The mechanism is as follows: an entrance of a new firm increases the chances of all other firms on the market to take low positions in the ranking, which, according to standard results of ordered search literature, leads to an increase in firms’ prices.