IDEAS home Printed from https://ideas.repec.org/p/cor/louvrp/2572.html
   My bibliography  Save this paper

Vertical product differentiation and two-sided markets

Author

Listed:
  • GABSZEWICZ, Jean J.
  • WAUTHY, Xavier Y.

Abstract

We model platform competition in a market where products are characterized by cross network externalities. Consumers differ in their valuation of these externalities. Although the exogenous set-up is entirely symmetric, we show that platform competition induces a vertical differentiation structure that allows for the co-existence of asymmetric platforms in equilibrium. We establish this result in two set-ups: in the first one platforms commit to prices, in the second one they commit to network sizes.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • GABSZEWICZ, Jean J. & WAUTHY, Xavier Y., 2014. "Vertical product differentiation and two-sided markets," LIDAM Reprints CORE 2572, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2572
    Note: In : Economics Letters, 123(1), 58-61, 2014
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    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.
    2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    3. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    4. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    5. Jean-Charles Rochet Author-Email:rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
    6. GABSZEWICZ, Jean & WAUTHY, Xavier, 2004. "Two-sided markets and price competition with multi-homing," LIDAM Discussion Papers CORE 2004030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul Belleflamme & Martin Peitz, 2019. "Managing competition on a two‐sided platform," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 5-22, January.
    2. Debora Di Gioacchino & Alina Verashchagina, 2017. "Mass media and attitudes to inequality," Working Papers in Public Economics 178, University of Rome La Sapienza, Department of Economics and Law.
    3. Etro, Federico, 2021. "Device-funded vs ad-funded platforms," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    4. Qihong Liu & Daniel Nedelescu & Ji Gu, 2021. "The impact of strategic agents in two-sided markets," Journal of Economics, Springer, vol. 134(3), pages 195-218, December.
    5. Belleflamme, Paul & Peitz, Martin, 2019. "Price disclosure by two-sided platforms," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    6. Joao Correia‐da‐Silva & Bruno Jullien & Yassine Lefouili & Joana Pinho, 2019. "Horizontal mergers between multisided platforms: Insights from Cournot competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 109-124, January.
    7. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    8. Maria Rosa Battaggion & Serena Marianna Drufuca, 2020. "Quality competition and entry: a media market case," Journal of Economics, Springer, vol. 130(1), pages 1-36, June.
    9. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    10. Ramnath K. Chellappa & Rajiv Mukherjee, 2021. "Platform Preannouncement Strategies: The Strategic Role of Information in Two-Sided Markets Competition," Management Science, INFORMS, vol. 67(3), pages 1527-1545, March.
    11. Elias Carroni, 2018. "Behaviour-based price discrimination with cross-group externalities," Journal of Economics, Springer, vol. 125(2), pages 137-157, October.
    12. Belleflamme, Paul & Peitz, Martin & Toulemonde, Eric, 2022. "The tension between market shares and profit under platform competition," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    13. Esther Gal‐Or & Ronen Gal‐Or & Nabita Penmetsa, 2019. "Can platform competition support market segmentation? Network externalities versus matching efficiency in equity crowdfunding markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 420-435, June.
    14. Kazakova, E. & Sandomirskaia, M. & Suvorov, A. & Khazhgerieva, A. & Shavshin, R., 2023. "Platforms, online labor markets, and crowdsourcing. Part 1. Traditional online labor market," Journal of the New Economic Association, New Economic Association, vol. 60(3), pages 120-148.
    15. Giovannetti, Emanuele & Siciliani, Paolo, 2023. "Platform Competition and Incumbency Advantage under Heterogeneous Lock-in effects," Information Economics and Policy, Elsevier, vol. 63(C).
    16. Yang Geng & Yulin Zhang & Jing Li, 2023. "Two-sided competition, platform services and online shopping market structure," Journal of Economics, Springer, vol. 138(2), pages 95-127, March.
    17. Zennyo, Yusuke, 2020. "Freemium competition among ad-sponsored platforms," Information Economics and Policy, Elsevier, vol. 50(C).
    18. Geng, Yang & Zhang, Yulin, 2020. "Platform launch in two-sided markets and users’ expectations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 558(C).
    19. Di Gioacchino, Debora & Verashchagina, Alina, 2020. "Mass media and preferences for redistribution," European Journal of Political Economy, Elsevier, vol. 63(C).
    20. Chung‐Hui Chou, 2021. "Could coexistence of open‐source and proprietary platforms be an equilibrium outcome?," Manchester School, University of Manchester, vol. 89(3), pages 297-309, June.
    21. Ding, Rong & Ko, Chiu Yu & Shen, Bo, 2022. "Partial compatibility in two-sided markets: Equilibrium and welfare analysis," Economic Modelling, Elsevier, vol. 116(C).
    22. Chiu Yu Ko & Bo Shen, 2021. "Are dominant platforms good for consumers?," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1364-1377, July.
    23. Jeitschko, Thomas D. & Tremblay, Mark J., 2014. "Homogeneous platform competition with endogenous homing," DICE Discussion Papers 166, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    24. Lambert, Louise & Dedeurwaerdere, Tom & Nyssens, Marthe & Severi, Elisabetta & Brolis, Olivier, 2019. "Unpacking the organisational diversity within the collaborative economy: The contribution of an analytical framework from social enterprise theory," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    25. Luigi Serio & Piero Tedeschi & Giovanni Ursino, 2018. "Making Sense of (Ultra) Low-Cost Flights Vertical Differentiation in Two-Sided Markets," Management Science, INFORMS, vol. 64(1), pages 401-420, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:cesptp:hal-00980363 is not listed on IDEAS
    2. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    3. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.
    4. Renato Gomes & Alessandro Pavan, 2013. "Cross-Subsidization and Matching Design," Discussion Papers 1559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Stefan Buehler & Daniel Halbheer, 2011. "Selling when Brand Image Matters," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(1), pages 102-118, March.
    6. Doh-Shin Jeon & Nikrooz Nasr, 2016. "News Aggregators and Competition among Newspapers on the Internet," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 91-114, November.
    7. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
    8. Jonathan Bainée, 2012. "Les opérateurs de mobilité électrique et la problématique de la diffusion du véhicule électrique (VE)," Post-Print hal-00980363, HAL.
    9. Marleen Marra, 2019. "Pricing and Fees in Auction Platforms with Two-Sided Entry," Working Papers hal-03393068, HAL.
    10. Böhme Enrico, 2016. "Second-Degree Price Discrimination on Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 15(2), pages 91-115, June.
    11. Justus Haucap & Ulrich Heimeshoff, 2014. "Google, Facebook, Amazon, eBay: Is the Internet driving competition or market monopolization?," International Economics and Economic Policy, Springer, vol. 11(1), pages 49-61, February.
    12. repec:hal:spmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    13. Njoroge Paul & Ozdaglar Asuman & Stier-Moses Nicolás E. & Weintraub Gabriel Y., 2014. "Investment in Two-Sided Markets and the Net Neutrality Debate," Review of Network Economics, De Gruyter, vol. 12(4), pages 355-402, February.
    14. Christian Jaag & Urs Trinkner, 2011. "A General Framework for Regulation and Liberalization in Network Industries," Chapters, in: Matthias Finger & Rolf W. Künneke (ed.), International Handbook of Network Industries, chapter 3, Edward Elgar Publishing.
    15. Rong, Ke & Xiao, Fei & Zhang, Xiaoyu & Wang, Jingjing, 2019. "Platform strategies and user stickiness in the online video industry," Technological Forecasting and Social Change, Elsevier, vol. 143(C), pages 249-259.
    16. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    17. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    18. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
    19. Chaturvedi, Rakesh & Dutta, Souvik & Kanjilal, Kiriti, 2021. "An economic model of the last-mile internet," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 620-638.
    20. Zijun (June) Shi & Kaifu Zhang & Kannan Srinivasan, 2019. "Freemium as an Optimal Strategy for Market Dominant Firms," Marketing Science, INFORMS, vol. 38(1), pages 150-169, January.
    21. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    22. Elizabeth J. Altman & Mary Tripsas, 2013. "Product to Platform Transitions: Organizational Identity Implications," Harvard Business School Working Papers 14-045, Harvard Business School, revised Sep 2014.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cor:louvrp:2572. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alain GILLIS (email available below). General contact details of provider: https://edirc.repec.org/data/coreebe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.