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Platform Competition: Who Benefits from Multihoming?

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  • Paul Belleflamme
  • Martin Peitz

Abstract

Competition between two-sided platforms is shaped by the possibility of multihoming. If initially both sides of platform singlehome, each platform provides users on one side exclusive access to its users on the other side. If then one side multihomes, platforms compete on the singlehoming side and exert monopoly power on the multihoming side. This paper explores the allocative effects of such a change from single- to multihoming. Our results challenge the conventional wisdom, according to which the possibility of multihoming hurts the side that can multihome, while benefiting the other side. This in not always true, as the opposite may happen or both sides may benefit.

Suggested Citation

  • Paul Belleflamme & Martin Peitz, 2018. "Platform Competition: Who Benefits from Multihoming?," CRC TR 224 Discussion Paper Series crctr224_2018_001, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2018_001
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    References listed on IDEAS

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    1. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
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    4. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
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    6. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 353-380, August.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Network effects; two-sided markets; platform competition; competitive bottleneck; multihoming;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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