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Two-part tariff competition between two-sided platforms

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Listed author(s):
  • Reisinger, Markus
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    Abstract

    Two-sided market models in which platforms compete in two-part tariffs, i.e., a subscription and a per-transaction fee, are often plagued by a continuum of equilibria. This paper incorporates heterogeneous trading behavior of agents into the existing framework. We show that this natural and realistic extension yields a unique equilibrium that has several reasonable properties. The equilibrium stays unique as the heterogeneity vanishes, thereby selecting a unique equilibrium from the continuum that exists under homogeneous trading behavior. We show that this equilibrium differs from equilibria obtained through other selection criteria. The analysis also provides novel empirical predictions.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0014292114000488
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    Article provided by Elsevier in its journal European Economic Review.

    Volume (Year): 68 (2014)
    Issue (Month): C ()
    Pages: 168-180

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    Handle: RePEc:eee:eecrev:v:68:y:2014:i:c:p:168-180
    DOI: 10.1016/j.euroecorev.2014.03.005
    Contact details of provider: Web page: http://www.elsevier.com/locate/eer

    Keywords: Two-sided markets; Equilibrium uniqueness; Heterogeneous trading behavior; Two-part tariffs;

    Find related papers by JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    References listed on IDEAS
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    Cited by:

    1. Shekhar, Shiva, 2017. "Homing choice and platform pricing strategy," DICE Discussion Papers 247, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Belleflamme, Paul & Omrani, Nessrine & Peitz, Martin, 2015. "The economics of crowdfunding platforms," Information Economics and Policy, Elsevier, vol. 33(C), pages 11-28.
    3. Griva, Krina & Vettas, Nikolaos, 2015. "On two-part tariff competition in a homogeneous product duopoly," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 30-41.
    4. Belleflamme, Paul & Toulemonde, Eric, 2016. "Who benefits from increased competition among sellers on B2C platforms?," Research in Economics, Elsevier, vol. 70(4), pages 741-751.
    5. Belleflamme, Paul & Peitz, Martin, 2016. "Platforms and network effects," Working Papers 16-14, University of Mannheim, Department of Economics.

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