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The Role of Coordination Bias in Platform Competition

  • Hanna Halaburda

    ()

    (Strategy Unit, Harvard Business School)

  • Yaron Yehezkel

    ()

    (Faculty of Management, Tel-Aviv University)

This paper considers platform competition in a two-sided market that includes buyers and sellers. One of the platforms benefits from a favorable coordination bias in the market, in that the two sides are more likely to join the advantaged platform. We find that the degree of the coordination bias affects the platform's decision regarding the business model (i.e., whether to subsidize buyers or sellers), the access fees and the size of the platform. A slight increase in the coordination bias may induce the advantaged platform to switch from subsidizing sellers to subsidizing buyers, or induce the disadvantaged platform to switch from subsidizing buyers to subsidizing sellers. Moreover, in the former case the advantaged platform switches from oversupplying to undersupplying sellers, while in the latter case the disadvantaged platform switches from undersupplying to oversupplying sellers.

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File URL: http://www.netinst.org/Halaburda_12-03.pdf
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Paper provided by NET Institute in its series Working Papers with number 12-03.

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Length: 38 pages
Date of creation: Aug 2012
Date of revision: Sep 2012
Handle: RePEc:net:wpaper:1203
Contact details of provider: Web page: http://www.NETinst.org/

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  1. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
  2. Lopez, Angel & Rey, Patrick, 2009. "Foreclosing Competition through Access Charges and Price Discrimination," IDEI Working Papers 570, Institut d'Économie Industrielle (IDEI), Toulouse, revised Feb 2012.
  3. Hanna Halaburda & Yaron Yehezkel, 2011. "Platform Competition under Asymmetric Information," Working Papers 11-05, NET Institute, revised Sep 2011.
  4. 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.
  5. Claussen, Jörg & Kretschmer, Tobias & Mayrhofer, Philip, 2010. "Incentives for Quality over Time – The Case of Facebook Applications," Discussion Papers in Business Administration 12500, University of Munich, Munich School of Management.
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