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Network goods, price discrimination, and two-sided platforms

Author

Listed:
  • Belleflamme, Paul

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Peitz, Martin

    (University of Mannheim)

Abstract

A monopolist selling a network good to heterogeneous users is shown to become a two-sided platform if it can condition prices on some user characteristics or if it cannot but induces user self-selection by offering screening contracts. This shows that the availability of sophisticated pricing instruments is essential to make a platform two-sided, not the ability to distinguish separate user groups. The use of freemium strategies (which consists of offering a base version at zero price and a premium version at a positive price) emerges as a special case of versioning.

Suggested Citation

  • Belleflamme, Paul & Peitz, Martin, 2024. "Network goods, price discrimination, and two-sided platforms," LIDAM Reprints CORE 3317, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3317
    DOI: https://doi.org/10.1628/jite-2024-0024
    Note: In: Journal of Institutional and Theoretical Economics, 2024
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    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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