IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/04036.html
   My bibliography  Save this paper

Two-Sided Platforms: Pricing and Social Efficiency - Extensions

Author

Listed:
  • Andrei Hagiu

Abstract

This paper contains two extensions of the modelling framework proposed by Hagiu (2004a) for studying two-sided market platforms. First, introducing vertical differentiation among both users and developers, we show that the optimal platform pricing structure continues to shift towards making a larger share of profits on developers relative to users when the latter have a stronger preference for product variety. Also, when developers are vertically differentiated, a two-sided proprietary platform may induce socially excessive product variety, a scenario which never occurs in the horizontal differentiation model. Second, we introduce developer investment in product quality and show that a two-sided proprietary platform may be more socially efficient than an open platform in terms of the product quality it induces, even when it is less efficient with respect to the level of product variety. In this context we also determine the profit-maximizing proportional variable fee charged by a proprietary platform to developers and show that it is is increasing in the degree of developer risk-aversion and is used by the platform to trade product variety for product quality when developers' marginal cost of quality provision increases.

Suggested Citation

  • Andrei Hagiu, 2004. "Two-Sided Platforms: Pricing and Social Efficiency - Extensions," Discussion papers 04036, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:04036
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/04e036.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrei Hagiu, 2004. "Two-Sided Platforms: Pricing and Social Efficiency," Discussion papers 04035, Research Institute of Economy, Trade and Industry (RIETI).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrei Hagiu, 2004. "Two-Sided Platforms: Pricing and Social Efficiency," Discussion papers 04035, Research Institute of Economy, Trade and Industry (RIETI).
    2. Bolt, Wilko & Tieman, Alexander F., 2008. "Heavily skewed pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1250-1255, September.
    3. Yuan, Michael Y., 2008. "The effects of barriers to entry on monopolistic intermediary online services: The case of a digital library," Socio-Economic Planning Sciences, Elsevier, vol. 42(1), pages 56-73, March.
    4. Matthew T. Clements & Hiroshi Ohashi, 2005. "Indirect Network Effects And The Product Cycle: Video Games In The U.S., 1994–2002," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 515-542, December.
    5. Chokri Aloui & Khaïreddine Jebsi, 2010. "Optimal pricing of a two-sided monopoly platform with a one-sided congestion effect," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(4), pages 423-439, December.
    6. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    7. Xiaodong Zhu & Wei Li, 2020. "Research on the Pricing Strategy of “Internet +” Recycling Platforms in a Two-Sided Network Environment," Sustainability, MDPI, vol. 12(3), pages 1-19, January.
    8. Jan KRÄMER & Michael WOHLFARTH, 2015. "Regulating Over-the-Top Service Providers in Two-Sided Content Markets: Insights from the Economic Literature," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(99), pages 71-90, 3rd quart.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bolt, Wilko & Tieman, Alexander F., 2008. "Heavily skewed pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1250-1255, September.
    2. Matthew T. Clements & Hiroshi Ohashi, 2005. "Indirect Network Effects And The Product Cycle: Video Games In The U.S., 1994–2002," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 515-542, December.
    3. Jan KRÄMER & Michael WOHLFARTH, 2015. "Regulating Over-the-Top Service Providers in Two-Sided Content Markets: Insights from the Economic Literature," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(99), pages 71-90, 3rd quart.
    4. Xiaodong Zhu & Wei Li, 2020. "Research on the Pricing Strategy of “Internet +” Recycling Platforms in a Two-Sided Network Environment," Sustainability, MDPI, vol. 12(3), pages 1-19, January.
    5. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    6. Yuan, Michael Y., 2008. "The effects of barriers to entry on monopolistic intermediary online services: The case of a digital library," Socio-Economic Planning Sciences, Elsevier, vol. 42(1), pages 56-73, March.
    7. Chokri Aloui & Khaïreddine Jebsi, 2010. "Optimal pricing of a two-sided monopoly platform with a one-sided congestion effect," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(4), pages 423-439, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:04036. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.