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Platform optimal capacity sharing: Willing to pay more does not guarantee a larger capacity share

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  • Aloui, Chokri
  • Jebsi, Khaïreddine

Abstract

In this paper, we study how a mediating business organization or platform allocates a fixed capacity (such as space, infrastructure, or bandwidth) between two distinct but interdependent groups of consumers (sides) that suffer from congestion. The analysis highlights that the platform's capacity sharing management depends not only on the participation levels of both sides but also on the externalities running between them. It is not true that a group's capacity share uniquely depends on its size. Besides, we argue that the platform may not assign the smallest capacity share to the least congestion-sensitive group. Finally, we establish a management rule that a platform's decision maker, e.g. trade fair manager, clinic owner, airport planner, or Internet Service Provider, should adopt when she is confronted with a capacity sharing trade-off between interdependent parties.

Suggested Citation

  • Aloui, Chokri & Jebsi, Khaïreddine, 2016. "Platform optimal capacity sharing: Willing to pay more does not guarantee a larger capacity share," Economic Modelling, Elsevier, vol. 54(C), pages 276-288.
  • Handle: RePEc:eee:ecmode:v:54:y:2016:i:c:p:276-288
    DOI: 10.1016/j.econmod.2016.01.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Two-sided market; Monopoly; Cross-externalities; Congestion; Capacity sharing function;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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