Download or read book Platform Pricing in Mixed Two Sided Markets written by Ming Gao and published by . This book was released on 2018 with total page 2 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Handbook of Industrial Organization written by Richard Schmalensee and published by North Holland. This book was released on 1989-09-11 with total page 640 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of industrial organization/Schmalensee.-V.2.
Download or read book Two sided Markets Pricing and Network Effects written by Bruno Jullien and published by . This book was released on 2021 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: The chapter has 9 sections, covering the theory of two-sided markets and related empirical work. Section 1 introduces the reader to the literature. Section 2 covers the case of markets dominated by a single monopolistic firm. Section 3 discusses the theoretical literature on competition for the market, focusing on pricing strategies that firms may follow to prevent entry. Section 4 discusses pricing in markets in which multiple platforms are active and serve both sides. Section 5 presents alternative models of platform competition. Section 6 discusses richer matching protocols whereby platforms price-discriminate by granting access only to a subset of the participating agents from the other side and discusses the related literature on matching design. Section 7 discusses identification in empirical work. Section 8 discusses estimation in empirical work. Finally, Section 9 concludes.
Download or read book Skewed Pricing in Two Sided Markets written by Wilko Bolt and published by . This book was released on 2011 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: In two-sided markets, one widely observes skewed pricing strategies, in which the price mark-up is much higher on one side of the market than the other. Using a simple model of two-sided markets, we show that, under constant elasticity of demand, skewed pricing is indeed profit maximizing. The most elastic side of the market is used to generate maximum demand by providing it with platform services at the lowest possible price.Through the positive network externality, full participation of the high-elasticity, low-price side of the market increases market participation of the other side. As this side is less price elastic, the platform is able to extract high prices. Our skewed pricing result also carries over when analyzing the socially optimal prices. Interestingly, this leads to below-marginal cost pricing in the social optimum. We motivate the analysis by looking at the Dutch debit card system.
Download or read book The Economics of Platforms written by Paul Belleflamme and published by Cambridge University Press. This book was released on 2021-11-11 with total page 275 pages. Available in PDF, EPUB and Kindle. Book excerpt: Digital platforms controlled by Alibaba, Alphabet, Amazon, Facebook, Netflix, Tencent and Uber have transformed not only the ways we do business, but also the very nature of people's everyday lives. It is of vital importance that we understand the economic principles governing how these platforms operate. This book explains the driving forces behind any platform business with a focus on network effects. The authors use short case studies and real-world applications to explain key concepts such as how platforms manage network effects and which price and non-price strategies they choose. This self-contained text is the first to offer a systematic and formalized account of what platforms are and how they operate, concisely incorporating path-breaking insights in economics over the last twenty years.
Download or read book The Oxford Handbook of the Digital Economy written by Martin Peitz and published by Oxford University Press. This book was released on 2012-08-23 with total page 615 pages. Available in PDF, EPUB and Kindle. Book excerpt: The economic analysis of the digital economy has been a rapidly developing research area for more than a decade. Through authoritative examination by leading scholars, this Handbook takes a closer look at particular industries, business practices, and policy issues associated with the digital industry. The volume offers an up-to-date account of key topics, discusses open questions, and provides guidance for future research. It offers a blend of theoretical and empirical works that are central to understanding the digital economy. The chapters are presented in four sections, corresponding with four broad themes: 1) infrastructure, standards, and platforms; 2) the transformation of selling, encompassing both the transformation of traditional selling and new, widespread application of tools such as auctions; 3) user-generated content; and 4) threats in the new digital environment. The first section covers infrastructure, standards, and various platform industries that rely heavily on recent developments in electronic data storage and transmission, including software, video games, payment systems, mobile telecommunications, and B2B commerce. The second section takes account of the reduced costs of online retailing that threatens offline retailers, widespread availability of information as it affects pricing and advertising, digital technology as it allows the widespread employment of novel price and non-price strategies (bundling, price discrimination), and auctions, as well as better tar. The third section addresses the emergent phenomenon of user-generated content on the Internet, including the functioning of social networks and open source. Finally, the fourth section discusses threats arising from digitization and the Internet, namely digital piracy, privacy and internet security concerns.
Download or read book Market definition and market power in the platform economy written by Jens-Uwe Franck and published by Centre on Regulation in Europe asbl (CERRE). This book was released on 2019-05-08 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the rise of digital platforms and the natural tendency of markets involving platforms to become concentrated, competition authorities and courts are more frequently in a position to investigate and decide merger and abuse cases that involve platforms. This report provides guidance on how to define markets and on how to assess market power when dealing with two-sided platforms. DEFINITION Competition authorities and courts are well advised to uniformly use a multi-markets approach when defining markets in the context of two-sided platforms. The multi-markets approach is the more flexible instrument compared to the competing single-market approach that defines a single market for both sides of a platform, as the former naturally accounts for different substitution possibilities by the user groups on the two sides of the platform. While one might think of conditions under which a single-market approach could be feasible, the necessary conditions are so severe that it would only be applicable under rare circumstances. To fully appreciate business activities in platform markets from a competition law point of view, and to do justice to competition law’s purpose, which is to protect consumer welfare, the legal concept of a “market” should not be interpreted as requiring a price to be paid by one party to the other. It is not sufficient to consider the activities on the “unpaid side” of the platform only indirectly by way of including them in the competition law analysis of the “paid side” of the platform. Such an approach would exclude certain activities and ensuing positive or negative effects on consumer welfare altogether from the radar of competition law. Instead, competition practice should recognize straightforwardly that there can be “markets” for products offered free of charge, i.e. without monetary consideration by those who receive the product. ASSESSMENT The application of competition law often requires an assessment of market power. Using market shares as indicators of market power, in addition to all the difficulties in standard markets, raises further issues for two-sided platforms. When calculating revenue shares, the only reasonable option is to use the sum of revenues on all sides of the platform. Then, such shares should not be interpreted as market shares as they are aggregated over two interdependent markets. Large revenue shares appear to be a meaningful indicator of market power if all undertakings under consideration serve the same sides. However, they are often not meaningful if undertakings active in the relevant markets follow different business models. Given potentially strong cross-group external effects, market shares are less apt in the context of two-sided platforms to indicate market power (or the lack of it). Barriers to entry are at the core of persistent market power and, thus, the entrenchment of incumbent platforms. They deserve careful examination by competition authorities. Barriers to entry may arise due to users’ coordination failure in the presence of network effect. On two-sided platforms, users on both sides of the market have to coordinate their expectations. Barriers to entry are more likely to be present if an industry does not attract new users and if it does not undergo major technological change. Switching costs and network effects may go hand in hand: consumer switching costs sometimes depend on the number of platform users and, in this case, barriers to entry from consumer switching costs increase with platform size. Since market power is related to barriers to entry, the absence of entry attempts may be seen as an indication of market power. However, entry threats may arise from firms offering quite different services, as long as they provide a new home for users’ attention and needs.
Download or read book Natural Monopolies in Digital Platform Markets written by Francesco Ducci and published by Cambridge University Press. This book was released on 2020-07-23 with total page 203 pages. Available in PDF, EPUB and Kindle. Book excerpt: Through three case studies, this book investigates whether digital industries are naturally monopolistic and evaluates policy approaches to market power.
Download or read book Two Sided Platforms written by Andrei Hagiu and published by . This book was released on 2005 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper models two-sided market platforms, which connect third-party suppliers (developers) of many different products and services to users who demand a variety of these products. From a positive perspective, our model provides a simple explanation for the stark differences in platform pricing structures observed across a range of industries, including software for computers and an increasing number of electronic devices, videogames, digital media, etc. We show that the optimal platform pricing structure shifts towards making a larger share of profits on developers when users have a stronger preference for variety and also when there is uncertainty with respect to the availability, or a limited supply, of third-party (high-quality) products. From a normative perspective, we show that the increasingly popular public policy presumption that open platforms are inherently more efficient than proprietary ones - in terms of induced product diversity, user adoption and total social welfare - is not justified in our framework. The key welfare tradeoff is between the extent to which a proprietary platform internalizes business-stealing, product diversity and indirect network effects and the two-sided deadweight loss it creates through monopoly pricing.
Download or read book Applications of Management Science written by Kenneth D. Lawrence and published by Emerald Group Publishing. This book was released on 2022-08-08 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: Applications of Management Science is core for those academics, researchers, and practitioners of management science in mitigating significant managerial decision-making problems, for both the public and the private sectors.
Download or read book Platforms and Artificial Intelligence written by Ahmed Bounfour and published by Springer Nature. This book was released on 2022-03-28 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: Artificial intelligence (AI) and platforms are closely related. Most investments in AI, especially in critical technologies, are provided by large platforms. This book describes how platforms invest in AI and how AI will impact the next generation of competences, following a twofold approach to do so: on the one hand, the book seeks to understand how platforms for investment in intangibles and AI are organized, but on the other hand, it provides a framework to describe how AI will change jobs and competences in the future. Moreover, the book addresses five main themes: 1. platforms, platformization, and the foundations of their business models; 2. artificial intelligence, technological tendencies, and the policy agenda; 3. artificial intelligence, productivity, and the next generation of competences; 4. artificial intelligence, productivity, and the digital divide; 5. artificial intelligence, ethics, and the post-truth society. The book’s content is mostly based on papers presented at the last two installments of the World Conference on Intellectual Capital for Communities. It brings together the views of leading scholars and experts on how artificial intelligence and platformization will impact competences in the near future.
Download or read book Platform Pricing and Investment to Drive Third Party Value Creation in Two Sided Networks written by Burcu Tan and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many two-sided platforms (e.g., eBay, Google, iOS, Android, Twitter, Amazon) provide integration tools, such as modular interfaces, interactive development environments, application programming interfaces (APIs), and help desks to reduce the costs and improve the functionality of third party content developed for the platform. The need for such investment is increasing with the rise of major new markets such as the Internet of Things. While crucial to platform success, platform integration tools are costly to create. We develop an analytic model to explore the key trade-offs behind investment in integration tools and how that investment interacts with pricing decisions in a two-sided market. We model these decisions under various scenarios including monopoly and competitive platforms as well as symmetric and asymmetric platforms. Our results suggest that the consideration of integration investment can push the market into regimes in which the standard pricing results from extant platform literature no longer hold, in particular the tendency to reduce prices to one side of a market in response to increasing benefit of the network to the other side. Moreover, integration investments must be well-coordinated with developer and consumer pricing decisions and may have to be revised dynamically as the platform gains traction in the market. Higher levels of investment into integration become desirable when the platform (1) faces favorable expectations, (2) has access to a high-quality developer community, and (3) operates in a market where developers earn a high profit margin creating content that is highly valued by the consumer market. Finally, we also discuss a number of policy implications of this work.
Download or read book Industrial Organization written by Paul Belleflamme and published by Cambridge University Press. This book was released on 2010-01-07 with total page 725 pages. Available in PDF, EPUB and Kindle. Book excerpt: Industrial Organization: Markets and Strategies provides an up-to-date account of modern industrial organization that blends theory with real-world applications. Written in a clear and accessible style, it acquaints the reader with the most important models for understanding strategies chosen by firms with market power and shows how such firms adapt to different market environments. It covers a wide range of topics including recent developments on product bundling, branding strategies, restrictions in vertical supply relationships, intellectual property protection, and two-sided markets, to name just a few. Models are presented in detail and the main results are summarized as lessons. Formal theory is complemented throughout by real-world cases that show students how it applies to actual organizational settings. The book is accompanied by a website containing a number of additional resources for lecturers and students, including exercises, answers to review questions, case material and slides.
Download or read book Exclusionary Pricing in Two sided Markets written by Andrea Amelio and published by . This book was released on 2020 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the incentives to engage in exclusionary pricing in the context of two-sided markets. Platforms are horizontally differentiated, and seek to attract users of two groups who single-home and enjoy indirect network externalities from the size of the opposite user group active on the same platform. The entrant incurs a fixed cost of entry, and the incumbent can commit to its prices before the entry decision is taken. The incumbent has thus the option to either accommodate entry, or to exclude entry and enjoy monopolistic profits, albeit under the constraint that its price must be low enough to not leave any room for an entrant to cover its fixed cost of entry. We find that, in the spirit of the literature on limit pricing, under certain circumstances even platforms find it profitable to exclude entrants if the fixed entry cost lies above a certain threshold. By studying the properties of the threshold, we show that the stronger the network externality, the lower the thresholds for which incumbent platforms find it profitable to exclude. We also find that entry deterrence is more likely to harm consumers the weaker are network externalities, and the more differentiated are the two platforms.
Download or read book A Quality signaling Rationale for Aftermarket Tying written by Marius Schwartz and published by . This book was released on 1995 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mixed Bundling in Two Sided Markets in the Presence of Installed Base Effects written by Yong Chao and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze mixed bundling in two-sided markets where installed base effects are present and find that the pricing structure deviates from traditional bundling as well as the standard two-sided markets literature - we determine prices on both sides fall with bundling. Mixed bundling acts as a price discrimination tool segmenting the market more efficiently. Consequently, as a by-product of this price discrimination, the two sides are better coordinated and social welfare is enhanced. We show unambiguously that platform participations increase on both sides of the market. After theoretically evaluating the impact mixed bundling has on prices and welfare, we take the model predictions to data from the portable video game console market. We find empirical support for all theoretical predictions.
Download or read book Basic Pricing Principles in Two Sided Markets written by Aaron Schiff and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper illustrates basic pricing issues in two-sided markets using some simple linear models based on Rochet & Tirole (2006) and Armstrong (2006). Monopoly, first-best and second-best prices when a single platform charges either usage fees or membership fees are examined. Some implications for competition policy and regulation of two-sided markets are are also discussed.
