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Platform Competition with Endogenous Multihoming

Author

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  • Roberto Roson

    (Università Ca’ Foscari di Venezia)

Abstract

A model of two-sided market (for credit cards) is introduced and discussed. In this model, agents can join none, one, or more than one platform (multihoming), depending on access prices and the choices made by agents on the opposite market side. Although emerging multihoming patterns are, clearly, one aspect of equilibrium in a two-sided market, this issue has not yet been thoroughly addressed in the literature. This paper provides a general theoretical framework, in which homing partitions are conceived as one aspect of market equilibrium, rather than being set ex-ante, through ad-hoc assumptions. The emergence of a specific equilibrium partition is a consequence of: (1) the structure of costs and benefits, (2) the degree and type of heterogeneity among agents, (3) the intensity of platform competition.

Suggested Citation

  • Roberto Roson, 2005. "Platform Competition with Endogenous Multihoming," Working Papers 2005.20, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2005.20
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    References listed on IDEAS

    as
    1. Marc Rysman, 2007. "An Empirical Analysis Of Payment Card Usage," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 1-36, March.
    2. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    3. Graeme Guthrie & Julian Wright, 2007. "Competing Payment Schemes," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 37-67, March.
    4. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    5. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December.
    6. GABSZEWICZ, Jean & WAUTHY, Xavier, 2004. "Two-sided markets and price competition with multi-homing," LIDAM Discussion Papers CORE 2004030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    8. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 353-380, August.
    9. Fabio M. Manenti & Ernesto Somma, 2002. "Plastic Clashes: Competition among Closed and Open Systems in the Credit Card Industry," Industrial Organization 0211012, University Library of Munich, Germany.
    10. Chakravorti Sujit & Roson Roberto, 2006. "Platform Competition in Two-Sided Markets: The Case of Payment Networks," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-25, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Muravskii, D. V. & Yablonsky, Sergey A., 2012. "Determining disruptive innovation potential of multi-sided platforms: case of digital books," Working Papers 837, Graduate School of Management, St. Petersburg State University.
    2. repec:ebl:ecbull:v:12:y:2007:i:7:p:1-8 is not listed on IDEAS
    3. George Gardner & Andrew Stone, 2009. "Competition Between Payment Systems," RBA Research Discussion Papers rdp2009-02, Reserve Bank of Australia.
    4. Alexander Rasch, 2007. "Platform competition with partial multihoming under differentiation: a note," Economics Bulletin, AccessEcon, vol. 12(7), pages 1-8.

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    More about this item

    Keywords

    Two-sided markets; Network externalities; Standards; Platforms; Multihoming;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L89 - Industrial Organization - - Industry Studies: Services - - - Other

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