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Platform Competition under Dispersed Information

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  • Bruno Jullien
  • Alessandro Pavan

Abstract

We study monopolistic and competitive pricing in a two-sided market where agents have incomplete information about the quality of the product provided by each platform. The analysis is carried out within a global-game framework that offers the convenience of equilibrium uniqueness while permitting the outcome of such equilibrium to depend on the pricing strategies of the competing platforms. We first show how the dispersion of information interacts with the network effects in determining the elasticity of demand on each side and thereby the equilibrium prices. We then study "informative" advertising campaigns that increase the agents’ ability to estimate their own valuations and/or the distribution of valuations on the other side of the market.

Suggested Citation

  • Bruno Jullien & Alessandro Pavan, 2013. "Platform Competition under Dispersed Information," Discussion Papers 1568, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:1568
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    More about this item

    Keywords

    two-sided markets; dispersed information; platform competition JEL Classification: D82;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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