Centralized Versus Decentralized Pricing Controls for Dynamic Matching Platforms

Aouad, Ali; Sarıtaç, Ömer; Yan, Chiwei

doi:10.2139/ssrn.4453799

Cited by 1 publication

(2 citation statements)

References 31 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Compared with a fix pricing policy, they show that dynamic pricing increases the platform's profit but decreases the consumer surplus and social welfare. Aouad et al (2023) use a fluid model of dynamic two-sided matching to study the effects of decentralized pricing for an online service platform. They suggest that decentralized pricing creates friction in the matching process, except if supply and demand arrivals are balanced or if the agents are patient.…”

Section: Platform's Dynamic Operational Strategiesmentioning

confidence: 99%

See 1 more Smart Citation

Dynamic competition and market structure for platform‐based products: roles of product quality and indirect network effect

Dou,

Wei,

et al. 2024

Int Trans Operational Res

View full text Add to dashboard Cite

We consider dynamic competition between two platform‐based products that exhibit two‐sided network effects, such as game consoles and intelligent hardware. Firms compete in terms of pricing and Research & Development investment, which are driven by consumers’ marginal utility of quality, indirect network effects, and the differentiation between consumers’ preference for the products. We find that with a small marginal utility of consumers, the equilibrium investment of one firm increases first and decreases later with its product quality but is not obviously sensitive to the rival's. In contrast, with a large marginal utility, if the quality of the two products is comparable, the equilibrium investment increases substantially. However, if one product pulls ahead, the other firm will stop investing. Besides, we find that when the intrinsic value and the network value coexist, the market becomes more concentrated, even when consumers’ marginal utility is small. The market concentration increases in both the consumers’ marginal utility and the indirect network effect but decreases in the degree of differentiation between consumers’ preference toward the two products. Interestingly, we show that differentiation plays an important role in shaping the market structure only when the network effect is weak. Counterintuitively, we show that the differentiation corrodes firms’ total profits, which demonstrates that less fierce competition resulting from low substitution leads to a lower profit. Additionally, we reveal that dynamic interaction between quality and installed base motivates firms to improve from a low quality, the first‐mover advantage does not ensure market dominance.

show abstract

Section: Platform's Dynamic Operational Strategiesmentioning

confidence: 99%

“…Aouad et al. (2023) use a fluid model of dynamic two‐sided matching to study the effects of decentralized pricing for an online service platform. They suggest that decentralized pricing creates friction in the matching process, except if supply and demand arrivals are balanced or if the agents are patient.…”

Section: Literature Reviewmentioning

confidence: 99%

Dynamic competition and market structure for platform‐based products: roles of product quality and indirect network effect

Dou,

Wei,

et al. 2024

Int Trans Operational Res

View full text Add to dashboard Cite

show abstract

Centralized Versus Decentralized Pricing Controls for Dynamic Matching Platforms

Cited by 1 publication

References 31 publications

Dynamic competition and market structure for platform‐based products: roles of product quality and indirect network effect

Dynamic competition and market structure for platform‐based products: roles of product quality and indirect network effect

Contact Info

Product

Resources

About