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Two-part tariff competition between two-sided platforms

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  • Reisinger, Markus

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.

Suggested Citation

  • Reisinger, Markus, 2014. "Two-part tariff competition between two-sided platforms," European Economic Review, Elsevier, vol. 68(C), pages 168-180.
    • Handle: RePEc:eee:eecrev:v:68:y:2014:i:c:p:168-180
    DOI: 10.1016/j.euroecorev.2014.03.005
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," CEPR Discussion Papers 16480, C.E.P.R. Discussion Papers.
    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. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    4. Belleflamme, Paul & Peitz, Martin & Toulemonde, Eric, 2020. "The tension between market shares and profit under platform competition," LIDAM Discussion Papers CORE 2020027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Wenqing Wu & Xuan Huang & Yue Li & Chien-Chi Chu, 2018. "Optimal Quality Strategy and Matching Service on Crowdfunding Platforms," Sustainability, MDPI, vol. 10(4), pages 1-17, April.
    6. 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.
    7. Chongqi Wu & Kunpeng Li & Tianqin Shi, 2017. "Supply chain coordination with two-part tariffs under information asymmetry," International Journal of Production Research, Taylor & Francis Journals, vol. 55(9), pages 2575-2589, May.
    8. Adachi, Takanori & Tremblay, Mark J., 2020. "Business-to-business bargaining in two-sided markets," European Economic Review, Elsevier, vol. 130(C).
    9. 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.
    10. Wang, Shiying & Chen, Huimiao & Wu, Desheng, 2019. "Regulating platform competition in two-sided markets under the O2O era," International Journal of Production Economics, Elsevier, vol. 215(C), pages 131-143.
    11. Shekhar, Shiva, 2017. "Homing choice and platform pricing strategy," DICE Discussion Papers 247, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2022. "Two-sided Markets, Pricing, and Network Effects," Working Papers hal-03629451, HAL.
    13. Paul Belleflamme & Martin Peitz, 2018. "Platforms and network effects," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 11, pages 286-317, Edward Elgar Publishing.
    14. Lin, Xiaogang & Zhou, Yong-Wu & Xie, Wei & Zhong, Yuanguang & Cao, Bin, 2020. "Pricing and Product-bundling Strategies for E-commerce Platforms with Competition," European Journal of Operational Research, Elsevier, vol. 283(3), pages 1026-1039.
    15. Iñigo Herguera, 2021. "Competencia y regulación de (algunas) plataformas digitales en la UE," Working Papers 2021-10, FEDEA.

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    More about this item

    Keywords

    Two-sided markets; Equilibrium uniqueness; Heterogeneous trading behavior; Two-part tariffs;
    All these keywords.

    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

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