Price Optimization Model for Platform’s Goods and Services in Multi-Sided Markets

Abstract

Purpose. The study is aimed at defining the nature of platforms in multi-sided markets in order to find the price optimization model for platform’s goods and services. Methodology. The article used general scientific and special research methods. The generalization of the main methodological approaches to the study of the essence of multi-sided markets, the identification of factors affecting the platform’s pricing strategy were based on the methods of dialectics, scientific abstraction, and systemic analysis. The basis of the study of the essence of “platforms” was laid on the use of the following methods: analysis and synthesis, induction and deduction, generalization. Economic and mathematical modeling, scientific abstraction, systemic structural analysis contributed to the development of our own model of the optimal strategy for choosing the price of goods and services by platforms. Findings. The article defines factors that affect the pricing of platform’s goods and services. An economic and mathematical model has also been developed to determine an optimal strategy for choosing the price in terms of Nash equilibrium. There have been identified three main factors, which produce the most significant impact on the price of goods and services of platforms: marginal costs; rate of return of another product is being implemented by the platform; elasticity of demand and price. Practical implications. In the conclusions, not only the advantages but also the limitations of the proposed economic and mathematical model have been pointed out, which can be addressed in further studies and implemented into specific living model of economic decisions while price optimization model for platform’s goods and services in multi-sided markets. Originality/value. The article is generalizing the previous experience within the niche of price optimization model. Also authors have developed their own economic and mathematical model of the optimal strategy for choosing the price for the platform’s products or services, which enabled us to identify its dependence on 3 main factors: marginal costs, rates of profitability of other products sold by the platform, elasticity of demand and price. These results can be overcome in future studies. The results and conclusions have been done by the authors and are totally original.