The Role of Coordination Bias in Platform Competition
AbstractThis paper considers platform competition in a two-sided market that includes buyers and sellers. One of the platforms benefits from a favorable coordination bias in the market, in that the two sides are more likely to join the advantaged platform. We find that the degree of the coordination bias affects the platform's decision regarding the business model (i.e., whether to subsidize buyers or sellers), the access fees and the size of the platform. A slight increase in the coordination bias may induce the advantaged platform to switch from subsidizing sellers to subsidizing buyers, or induce the disadvantaged platform to switch from subsidizing buyers to subsidizing sellers. Moreover, in the former case the advantaged platform switches from oversupplying to undersupplying sellers, while in the latter case the disadvantaged platform switches from undersupplying to oversupplying sellers.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 12-03.
Length: 38 pages
Date of creation: Aug 2012
Date of revision: Sep 2012
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Web page: http://www.NETinst.org/
platform competition; two-sided markets; coordination bias;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-BEC-2012-10-20 (Business Economics)
- NEP-COM-2012-10-20 (Industrial Competition)
- NEP-MIC-2012-10-20 (Microeconomics)
- NEP-NET-2012-10-20 (Network Economics)
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.:
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