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Creating platforms by hosting rivals

Author

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  • Hagiu, Andrei
  • Jullien, Bruno
  • Wright, Julian

Abstract

We explore conditions under which a multiproduct firm can profitably turn itself into a platform by "hosting rivals", i.e. by inviting rivals to sell products or services on top of its core product. Hosting eliminates the additional shopping costs to consumers of buying a specialist rival's competing version of the multiproduct firm's non-core product. On the one hand, this makes it easier for the rival to compete on the non-core product. On the other hand, hosting turns the rival from a pure competitor into a complementor: the value added by its product now helps raise consumer demand for the multi-product firm's core product. As a result, hosting can be both unilaterally profitable for the multi-product firm and jointly profitable for both firms.

Suggested Citation

  • Hagiu, Andrei & Jullien, Bruno & Wright, Julian, 2018. "Creating platforms by hosting rivals," TSE Working Papers 18-970, Toulouse School of Economics (TSE), revised Mar 2019.
    • Handle: RePEc:tse:wpaper:33123
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    References listed on IDEAS

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    Cited by:

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    3. Rabassa, Valérie & Sabri, Ouidade & Spaletta, Claire, 2022. "Conversational commerce: Do biased choices offered by voice assistants’ technology constrain its appropriation?," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    4. Hervas-Drane, Andres & Shelegia, Sandro, 2022. "Price competition with a stake in your rival," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    5. Massimo Motta & Martin Peitz, 2023. "Denial of Interoperability and Future First-Party Entry," CRC TR 224 Discussion Paper Series crctr224_2023_447, University of Bonn and University of Mannheim, Germany.
    6. Federico Etro, 2021. "Product selection in online marketplaces," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(3), pages 614-637, August.
    7. Padilla, Jorge & Piccolo, Salvatore & Vasconcelos, Helder, 2021. "Should vertically integrated platforms be mandated to share information with their rivals?," Economics Letters, Elsevier, vol. 203(C).
    8. Alexandre de Cornière & Miklos Sarvary, 2023. "Social Media and News: Content Bundling and News Quality," Management Science, INFORMS, vol. 69(1), pages 162-178, January.
    9. Maximilian Julius Krome & Ulrich Pidun, 2023. "Conceptualization of research themes and directions in business ecosystem strategies: a systematic literature review," Management Review Quarterly, Springer, vol. 73(2), pages 873-920, June.
    10. Esther Gal-Or & Qiaoni Shi, 2022. "Designing Entry Strategies for Subscription Platforms," Management Science, INFORMS, vol. 68(10), pages 7597-7613, October.
    11. Markus Reisinger & Jens Schmidt & Nils Stieglitz, 2021. "How Complementors Benefit from Taking Competition to the System Level," Management Science, INFORMS, vol. 67(8), pages 5106-5123, August.
    12. Loginova, Oksana, 2022. "Branded websites and marketplace selling: Competing during COVID-19," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 577-592.
    13. Rong, Jianxin & Wang, Dazhong, 2023. "Contracting in hierarchical platforms," Economics Letters, Elsevier, vol. 226(C).
    14. Andrei Hagiu & Tat‐How Teh & Julian Wright, 2022. "Should platforms be allowed to sell on their own marketplaces?," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 297-327, June.

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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