Platform Pricing in Mixed Two‐sided Markets

Abstract

When a consumer can appear on both sides of a two‐sided market, such as a user who both buys and sells on eBay, the platform may want to bundle the services it provides to two sides. I develop a general model for such “mixed” two‐sided markets and show that a monopolist platform's incentive to bundle and its optimal pricing strategy are determined by simple formulas using familiar price elasticities of demand, which embody the bundling effect, and price‐cost margins adjusted for network externalities, which incorporate “two‐sidedness.” The optimal pricing rule in such markets generalizes the familiar Lerner formula.

Platform market competition with endogenous side decisions

“…This result is in sharp contrast to the one in Gao () who shows that social welfare is reduced by the profit‐maximizing platform's incentive to bundle the services for different sides, but consistent with Hagiu ().…”

“…As such, it can be interpreted as a description of the equilibrium at a particular time with realized independently in each period. If consumers can be on both sides over time, we can consider a more generalized pricing scheme such as bundling as in Gao ().…”

“…To apply our model to the sharing economy platforms, we also extend our analysis to consider an initial investment stage, which makes participants the owner of some durable goods to rent out. One notable exception is Gao () who analyzes a general model for two‐sided markets in which a consumer may appear on different sides of the market. However, the focus of his paper is very different from ours.…”

Online Reviews Matter: How Can Platforms Benefit from Online Reviews?

“…The third related research is the growing literature on mechanism design in the information system. Researchers in information systems not only design and evaluate new systems in a business context [33], but also focus on how to price the services of the mechanisms [13,[34][35][36][37][38][39][40][41]. For instance, Amit Basu et al examine the online and authentication services for matching-seekers, and study how the matching platform should price its search and authentication services [13].…”

İki Taraflı Piyasalar: OECD Mobil Telekomünikasyon Piyasaları’nda Su Yatağı Etkisi Örneği

“…Unlike the classic twosided markets, mobile telecommunications market subscribers can be found on both sides of the market, sometimes as a caller and sometimes as the one who is being called. In other words, there is a high level of overlap between the groups in the market (Gao 2018;Valletti 2006). Due to this situation, the effects of pricing strategies and regulations in the mobile telecommunications market are highly important in the analysis of two-sided markets.…”