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Welfare implications of personalized pricing in competitive platform markets: The role of network effects

Author

Listed:
  • Qiuyu Lu

    (Ph.D. in Economics, Graduate School of Economics, the University of Osaka)

  • Noriaki Matsushima

    (Osaka School of International Public Policy, the University of Osaka)

  • Shiva Shekhar

    (Tilburg School of Economics and Management, Tilburg University)

Abstract

This study explores the welfare impact of personalized pricing for consumers in a duopolistic two-sided market, with consumers single-homing and developers affiliating with a platform according to their outside option. Personalized pricing, which is private in nature, cannot influence expectations regarding the network sizes, inducing the platforms to offer lower participation fees for developers. Those lower fees increase network benefits for consumers, allowing the platforms to exploit these benefits through personalized pricing. Personalized prices are higher when the network value for developers is high, benefiting competing platforms at the expense of consumers. These findings offer policy insights on personalized pricing.

Suggested Citation

  • Qiuyu Lu & Noriaki Matsushima & Shiva Shekhar, 2025. "Welfare implications of personalized pricing in competitive platform markets: The role of network effects," OSIPP Discussion Paper 25E003, Osaka School of International Public Policy, Osaka University.
    • Handle: RePEc:osp:wpaper:25e003
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    File URL: https://www.osipp.osaka-u.ac.jp/archives/DP/2025/DP2025E003.pdf
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    More about this item

    Keywords

    Personalized pricing; Uniform prices; Two-sided market; Content developers;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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