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Platform Competition with Endogenous Multihoming

  • Roberto Roson

    (Università Ca’ Foscari di Venezia)

A model of two-sided market (for credit cards) is introduced and discussed. In this model, agents can join none, one, or more than one platform (multihoming), depending on access prices and the choices made by agents on the opposite market side. Although emerging multihoming patterns are, clearly, one aspect of equilibrium in a two-sided market, this issue has not yet been thoroughly addressed in the literature. This paper provides a general theoretical framework, in which homing partitions are conceived as one aspect of market equilibrium, rather than being set ex-ante, through ad-hoc assumptions. The emergence of a specific equilibrium partition is a consequence of: (1) the structure of costs and benefits, (2) the degree and type of heterogeneity among agents, (3) the intensity of platform competition.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.20.

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Date of creation: Jan 2005
Date of revision:
Handle: RePEc:fem:femwpa:2005.20
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  1. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA.
  2. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  3. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer, vol. 32(2), pages 353-380, August.
  5. Sujit Chakravorti & Roberto Roson, 2004. "Platform competition in two-sided markets: the case of payment networks," Working Paper Series WP-04-09, Federal Reserve Bank of Chicago.
  6. GABSZEWICZ, Jean & WAUTHY, Xavier, 2004. "Two-sided markets and price competition with multi-homing," CORE Discussion Papers 2004030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  8. Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
  9. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December.
  10. Fabio M. Manenti & Ernesto Somma, 2002. "Plastic Clashes: Competition among Closed and Open Systems in the Credit Card Industry," Industrial Organization 0211012, EconWPA.
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