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Two-Sided Platforms and Biases in Technology Adoption

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  • Jay Pil Choi
  • Doh-Shin Jeon

Abstract

We investigate the relationship between market structure and platforms’ incentives to adopt technological innovations in two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and to extract surplus on the advertising side. We consider innovations that affect the two sides in an opposite way. We compare private incentives with social incentives and find that the bias in technology adoption depends crucially on whether the non-negative pricing constraint binds or not. Our results provide a rationale for a tougher competition policy to curb concentration if competition authorities put more weight on consumer surplus in welfare calculations.

Suggested Citation

  • Jay Pil Choi & Doh-Shin Jeon, 2020. "Two-Sided Platforms and Biases in Technology Adoption," CESifo Working Paper Series 8559, CESifo.
    • Handle: RePEc:ces:ceswps:_8559
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp8559.pdf
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    References listed on IDEAS

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    13. Jay Pil Choi & Heiko Gerlach, 2014. "Selection Biases in Complementary R&D Projects," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(4), pages 899-924, December.
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    Cited by:

    1. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    2. Shota Ichihashi & Byung-Cheol Kim, 2023. "Addictive Platforms," Management Science, INFORMS, vol. 69(2), pages 1127-1145, February.
    3. Etro, Federico, 2023. "Platform competition with free entry of sellers," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    4. Song-Kyoo (Amang) Kim, 2022. "Versatile Stochastic Two-Sided Platform Models," Mathematics, MDPI, vol. 11(1), pages 1-15, December.

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    More about this item

    Keywords

    technology adoption; two-sided platforms; non-negative pricing constraint; pass-through;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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