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Asymmetric Platform Oligopoly

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  • Martin Peitz
  • Susumu Sato

Abstract

We propose a tractable model of asymmetric platform oligopoly in which users from two distinct groups are subject to within-group and cross-group network effects and decide which platform to join. We characterize the equilibrium when platforms manage user access by setting participation fees. We explore the effects of platform entry, change of incumbent platforms’ quality under free entry, and partial compatibility on market outcomes. We show how the analysis can be extended to partial user participation and zero fees for one of the user groups.

Suggested Citation

  • Martin Peitz & Susumu Sato, 2023. "Asymmetric Platform Oligopoly," CRC TR 224 Discussion Paper Series crctr224_2023_428v2, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_428v2
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp428
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    References listed on IDEAS

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    1. Yannis Bakos & Hanna Halaburda, 2020. "Platform Competition with Multihoming on Both Sides: Subsidize or Not?," Management Science, INFORMS, vol. 66(12), pages 5599-5607, December.
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    3. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
    4. Hanna Halaburda & Bruno Jullien & Yaron Yehezkel, 2020. "Dynamic competition with network externalities: how history matters," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 3-31, March.
    5. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    6. Simon P. Anderson, Nisvan Erkal and, 2009. "Aggregative Oligopoly Games with Entry," Department of Economics - Working Papers Series 1175, The University of Melbourne, revised 2013.
    7. repec:hrv:faseco:4589709 is not listed on IDEAS
    8. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 483-512.
    9. Drew Fudenberg & Jean Tirole, 2000. "Pricing a Network Good To Deter Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 373-390, December.
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    Cited by:

    1. Martin Peitz, 2023. "Governance and Regulation of Platforms," CRC TR 224 Discussion Paper Series crctr224_2023_480, University of Bonn and University of Mannheim, Germany.

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    More about this item

    Keywords

    oligopoly theory; aggregative games; network effects; two-sided markets; two-sided single-homing; free entry; compatibility;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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