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Two-Sided Platforms With Endogenous Quality Differentiation

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  • María Fernanda Viecens

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Abstract

In this paper we construct a simple model of platform price competition with two main novel features. First, platforms endogenously decide the quality of their `access service' and second, each group exhibits preferences not only about the number of agents in the opposite group, but also about their type or quality. Additionally, sellers also care about the type of agents in their own group. Our interest is to examine the set of conditions under which, in spite of the network externalities, more than one plaftorm coexist in equilibrium. We show that when quality is endogenously determined by the choices of agents these platforms could be asymmetric.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we061204.

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Date of creation: Feb 2006
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Handle: RePEc:cte:werepe:we061204

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  1. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  2. Damiano, Ettore & Li, Hao, 2005. "Competing Matchmaking," Micro Theory Working Papers damiano-05-01-25-10-08-07, Microeconomics.ca Website, revised 18 Oct 2005.
  3. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
  4. David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
  5. David S. Evans & Andrei Hagiu & Richard Schmalensee, 2004. "A Survey Of The Economic Role Of Software Platforms In Computer - Based Industries," Discussion papers 04032, Research Institute of Economy, Trade and Industry (RIETI).
  6. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
  7. Nocke, Volker & Peitz, Martin & Stahl, Konrad O., 2004. "Platform Ownership," CEPR Discussion Papers 4657, C.E.P.R. Discussion Papers.
  8. Wright, Julian, 2003. "One-Sided Logic in Two-Sided Markets," Working paper 382, Regulation2point0.
  9. Pashigian, B Peter & Gould, Eric D, 1998. "Internalizing Externalities: The Pricing of Space in Shopping Malls," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 115-42, April.
  10. Glenn Ellison & Sara Fisher Ellison, 2005. "Lessons About Markets from the Internet," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 139-158, Spring.
  11. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  12. GABSZEWICZ, Jean & WAUTHY, Xavier, 2004. "Two-sided markets and price competition with multi-homing," CORE Discussion Papers 2004030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Basaluzzo, Gabriel & Miravete, Eugenio J, 2007. "Constrained Monopoly Pricing with Random Participation," CEPR Discussion Papers 6620, C.E.P.R. Discussion Papers.
  14. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  15. David S. Evans, 2003. "Some Empirical Aspects of Multi-sided Platform Industries," Review of Network Economics, De Gruyter, vol. 2(3), pages 1.
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