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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. 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).
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  5. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
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  7. 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.
  8. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
  9. Basaluzzo, Gabriel & Miravete, Eugenio J, 2007. "Constrained Monopoly Pricing with Random Participation," CEPR Discussion Papers 6620, C.E.P.R. Discussion Papers.
  10. Ettore Damiano & Li Hao, 2008. "Competing Matchmaking," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 789-818, 06.
  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. David S. Evans & Richard Schmalensee, 2005. "The Industrial Organization of Markets with Two-Sided Platforms," NBER Working Papers 11603, National Bureau of Economic Research, Inc.
  13. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
  14. Evans David S., 2003. "Some Empirical Aspects of Multi-sided Platform Industries," Review of Network Economics, De Gruyter, vol. 2(3), pages 1-19, September.
  15. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
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