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Homing choice and platform pricing strategy

Listed author(s):
  • Shekhar, Shiva

We compare a discriminatory pricing regime with a non-discriminatory regime in a competitive bottleneck model where content providers endogenously sort into single or multi-homers. We find that consumer prices rise when the share of single-homers increases in the non-discriminatory case, while they stay constant in the discriminatory pricing regime. A discriminatory pricing regime leads to higher platform profits than the non-discriminatory regime when the share of single-homers are relatively high. When the share of single-homers is relatively high (low), the discriminatory pricing regime leads to higher (lower) consumer surplus and social welfare when compared with the non-discriminatory regime.

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File URL: https://www.econstor.eu/bitstream/10419/156695/1/883937166.pdf
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Paper provided by University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 247.

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Date of creation: 2017
Handle: RePEc:zbw:dicedp:247
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  1. Irina Suleymanova & Christian Wey, 2012. "On the role of consumer expectations in markets with network effects," Journal of Economics, Springer, vol. 105(2), pages 101-127, March.
  2. Qihong Liu & Konstantinos Serfes, 2013. "Price Discrimination in Two-Sided Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 768-786, December.
  3. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, 09.
  4. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
  5. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
  6. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
  7. Jay Pil Choi, 2010. "TYING IN TWO-SIDED MARKETS WITH MULTI-HOMING -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 607-626, 09.
  8. Rasch, Alexander & Wenzel, Tobias, 2013. "Piracy in a two-sided software market," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 78-89.
  9. Reisinger, Markus, 2014. "Two-part tariff competition between two-sided platforms," European Economic Review, Elsevier, vol. 68(C), pages 168-180.
  10. Thomes, Tim Paul, 2015. "In-house publishing and competition in the video game industry," Information Economics and Policy, Elsevier, vol. 32(C), pages 46-57.
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