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Two-sided markets and price competition with multi-homing

  • GABSZEWICZ, Jean
  • WAUTHY, Xavier

We model duopoly competition between two platforms.They operate in a two-sided market where agents are heterogeneous on both sides of the market and are allowed to mulithome. Network effects are captured within a vertical differentiation framework.Under single-homing there exists an interior equilibrium where networks exhibit asymmetric sizes and both firms enjoy positive profits.When all agents are allowed to patronize the two platforms, we show that in equilibrium multi-homing takes place on one side of the market only. Moreover, the only equilibrium exhibiting positive profits for both platforms replicates the collusive outcome.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004030.

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Date of creation: 00 May 2004
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Handle: RePEc:cor:louvco:2004030
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  1. Wauthy, X., 1994. "Quality Choice in Models of Vertical Differentiation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1994033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Evans David S., 2003. "Some Empirical Aspects of Multi-sided Platform Industries," Review of Network Economics, De Gruyter, vol. 2(3), pages 1-19, September.
  3. GABSZEWICZ, Jean J. & WAUTHY, Xavier Y., . "The option of joint purchase in vertically differentiated markets," CORE Discussion Papers RP -1667, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Hausman, Jerry A & Leonard, Gregory K & Tirole, Jean, 2003. " On Nonexclusive Membership in Competing Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 43-62, Spring.
  5. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
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