Platform Competition under Dispersed Information
AbstractWe study monopolistic and competitive pricing in a two-sided market where agents have incomplete information about the quality of the product provided by each platform. The analysis is carried out within a global-game framework that offers the convenience of equilibrium uniqueness while permitting the outcome of such equilibrium to depend on the pricing strategies of the competing platforms. We first show how the dispersion of information interacts with the network effects in determining the elasticity of demand on each side and thereby the equilibrium prices. We then study "informative" advertising campaigns that increase the agents’ ability to estimate their own valuations and/or the distribution of valuations on the other side of the market.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1568.
Date of creation: 01 May 2013
Date of revision:
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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Find related papers by JEL classification:
- pla - - - - - -
- com - - - - - -
- JEL - Labor and Demographic Economics - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-05 (All new papers)
- NEP-COM-2013-08-05 (Industrial Competition)
- NEP-CTA-2013-08-05 (Contract Theory & Applications)
- NEP-MIC-2013-08-05 (Microeconomics)
- NEP-MKT-2013-08-05 (Marketing)
- NEP-NET-2013-08-05 (Network Economics)
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