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Network Goods, Price Discrimination, and Two-sided Platforms

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  • Paul Belleflamme
  • Martin Peitz

Abstract

A monopolist selling a network good to heterogeneous users is shown to become a twosided platform if it can condition prices on some user characteristics or if it cannot but induces user self-selection by offering screening contracts. This shows that the availability of sophisticated pricing instruments is essential to make a platform two-sided, not the ability to distinguish separate user groups. The use of freemium strategies (which consists of offering a base version at zero price and a premium version at a positive price) emerges as a special case of versioning.

Suggested Citation

  • Paul Belleflamme & Martin Peitz, 2023. "Network Goods, Price Discrimination, and Two-sided Platforms," CRC TR 224 Discussion Paper Series crctr224_2020_188v2, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_188v2
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp188
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    Cited by:

    1. Alexandre de Cornière & Andrea Mantovani & Shiva Shekhar & Alexandre de Cornière, 2023. "Third-Degree Price Discrimination in Two-Sided Markets," CESifo Working Paper Series 10618, CESifo.
    2. Cuntz, Alexander & Bergquist, Kyle, 2022. "Exclusive content and platform competition in Latin America," Information Economics and Policy, Elsevier, vol. 60(C).
    3. de Cornière, Alexandre & Mantovani, Andrea & Shekhar, Shiva, 2023. "Third-Degree Price Discrimination in Two-Sided Markets," TSE Working Papers 23-1464, Toulouse School of Economics (TSE).
    4. Mohammed Mardan & Mark J. Tremblay, 2022. "Network Effects: Betwixt and Between," CESifo Working Paper Series 10082, CESifo.
    5. Decarolis, Francesco & Li, Muxin, 2023. "Regulating online search in the EU: From the android case to the digital markets act and digital services act," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    6. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.

    More about this item

    Keywords

    Network goods; two-sided platforms; platform pricing; group pricing; versioning; freemium;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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