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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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    Cited by:

    1. is not listed on IDEAS
    2. Alexandre de Cornière & Andrea Mantovani & Shiva Shekhar, 2025. "Third-Degree Price Discrimination in Two-Sided Markets," Management Science, INFORMS, vol. 71(4), pages 3340-3356, April.
    3. Mardan, Mohammed & Tremblay, Mark J., 2025. "Optimal platform pricing with multi-sided users: A direct and indirect network approach," European Journal of Operational Research, Elsevier, vol. 321(2), pages 503-515.
    4. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    5. Mohammed Mardan & Mark J. Tremblay, 2022. "Network Effects: Betwixt and Between," CESifo Working Paper Series 10082, CESifo.
    6. Cuntz, Alexander & Bergquist, Kyle, 2022. "Exclusive content and platform competition in Latin America," Information Economics and Policy, Elsevier, vol. 60(C).
    7. Decarolis, Francesco & Li, Muxin, 2023. "Regulating online search in the EU: From the android case to the digital markets act and digital services act," International Journal of Industrial Organization, Elsevier, vol. 90(C).

    More about this item

    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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