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Platform Competition with Endogenous Multihoming

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Author Info
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.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.20.

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Date of creation: Jan 2005
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Handle: RePEc:fem:femwpa:2005.20

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Related research
Keywords: Two-sided markets; Network externalities; Standards; Platforms; Multihoming;

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Find related papers by 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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rochet, Jean-Charles & Tirole, Jean, 2005. "Two-Sided Markets : A Progress Report," IDEI Working Papers 275, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
    • Jean-Charles Rochet Author-Email: rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
  2. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer, vol. 32(2), pages 353-380, August. [Downloadable!] (restricted)
  3. Fabio M. Manenti & Ernesto Somma, 2002. "Plastic Clashes: Competition among Closed and Open Systems in the Credit Card Industry," Industrial Organization 0211012, EconWPA. [Downloadable!]
  4. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December. [Downloadable!] (restricted)
  5. 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.
  6. 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, 06. [Downloadable!] (restricted)
    Other versions:
  7. 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). [Downloadable!]
  8. Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics. [Downloadable!]
  9. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics. [Downloadable!]
  10. Sujit Chakravorti & Roberto Roson, 2004. "Platform competition in two-sided markets: the case of payment networks," Working Paper Series WP-04-09, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  11. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
    Other versions:
  12. Benjamin Hermalin & Michael L. Katz, 2006. "Your Network or Mine? The Economics of Routing Rules," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 692-719, Autumn.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sujit Chakravorti & Roberto Roson, 2006. "Platform Competition in Two-Sided Markets: The Case of Payment Networks," Review of Network Economics, Concept Economics, vol. 5(1), pages 118-143, March. [Downloadable!]
    Other versions:
  2. Alexander Rasch, 2007. "Platform competition with partial multihoming under differentiation: a note," Economics Bulletin, Economics Bulletin, vol. 12(7), pages 1-8. [Downloadable!]
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