Platform market competition with endogenous side decisions

Jay Pil Choi, Yusuke Zennyo

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper develops a framework to analyze platform competition in two-sided markets in which agents endogenously decide on which side of a platform to join. We characterize the equilibrium pricing structure and perform a comparative statics analysis on how the distribution of agents’ preferences affects the platforms’ profits. We also show that the market equilibrium under profit-maximizing platforms leads to the first best social surplus, which illustrates the importance of the price mechanism to induce more balanced participation across the two sides. This framework can be applied to analyze market competition for “rental” or “sharing” platforms. In addition, we extend our analysis to consider an initial investment stage, which makes participants the owner of some durable goods to rent out.

Original languageEnglish
Pages (from-to)73-88
Number of pages16
JournalJournal of Economics and Management Strategy
Volume28
Issue number1
DOIs
Publication statusPublished - 2019 Mar 1

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Profitability
Static analysis
Costs
Market competition
Profit
Surplus
Owners
Price mechanism
Participation
Equilibrium pricing
Rent
Join
Market equilibrium
Comparative static analysis
Two-sided markets

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

Cite this

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Platform market competition with endogenous side decisions. / Choi, Jay Pil; Zennyo, Yusuke.

In: Journal of Economics and Management Strategy, Vol. 28, No. 1, 01.03.2019, p. 73-88.

Research output: Contribution to journalArticle

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