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Partial Multihoming in Two-sided Markets

  • Rattanasuda Poolsombat
  • Gianluigi Vernasca
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    In this paper we explore the possibility of "partial-multihoming" in a two-sided market where a subset of agents, on one or both side(s), may multihome in equilibrium. We consider a model in which platforms are spatially differentiated and on each side of the market there are two type of agents, low type and high type agents, that differ only by their preferences over the network benefits. We derive under which conditions of network preferences, an equilibrium with partial multihoming on both sides exists. We show that for such an equilibrium to exist, the network benefits of high type agents must be sufficiently higher than transportation costs. Furthermore, the proportions of agents who multihome on both sides must be sufficiently small. Finally, we show that independently of the degree of multihoming on the other side of the market, agents in each group face higher prices when there is partial multihoming on their side than when there is singlehoming.

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    File URL: http://www.york.ac.uk/media/economics/documents/discussionpapers/2006/0610.pdf
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    Paper provided by Department of Economics, University of York in its series Discussion Papers with number 06/10.

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    Date of creation: Jun 2006
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    Handle: RePEc:yor:yorken:06/10
    Contact details of provider: Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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    Web page: http://www.york.ac.uk/economics/
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    1. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
    2. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May.
    3. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer, vol. 32(2), pages 353-380, August.
    4. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
    5. repec:reg:rpubli:253 is not listed on IDEAS
    6. Doganoglu, Toker & Wright, Julian, 2006. "Multihoming and compatibility," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 45-67, January.
    7. 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).
    8. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
    9. Mark McCabe & Christopher Snyder, 2004. "The Economics of Open-Access Journals," Working Papers 04-18, NET Institute, revised Nov 2004.
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