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Vertical product differentiation and two-sided markets

Author

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  • 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.
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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
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    JEL classification:

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

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