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Research On Competitive Strategy In Two-Sided Platforms

Posted on:2012-02-14Degree:DoctorType:Dissertation
Country:ChinaCandidate:D W LiuFull Text:PDF
GTID:1109330467982699Subject:Management Science and Engineering
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The theory of two-sided markets is the theoretical frontier of industry organization theory until21st century. With the rapid development of the knowledge economy and global economic integration, the boundaries between burgeoning industry and traditional industry have collapsed. The way of life and mode of production in the society have been or are being changed. Individual competition among enterprise has expanded to integral competition among industry chains or industrial networks, and the existence of network effect has caused more intense competition. Two-sided markets provided a new perspective on analysis of company’s competition environment and strategy. The existed papers mostly focus on the form incentives of two-sided markets and its particular price structure, the research on competitive strategy is not systematic enough. Thus, to study the competitive strategy of two-sided platforms has overarching importance to the theoretical and practical significance.After reviewing the related studies on two-sided markets, and using the frame of two-sided markets theory, the competitive strategy of two-sided platforms is researched systematically; it involves the strategy of equilibrium market structure, the compatible strategy and multi-homing strategy.There are six main sections in the paper as follows.(1) According to the Structure-Conduct-Performance approach, the theoretical frame on competitive strategy has constructed, and then the content to research, the study domain and target is clarified.(2) An equilibrium model on market structure with two-sided network effects was build. The results suggest that the market structure is determined by the parameters of network value and non-network value which affect the customer value and the number of platforms in the industry. Compatibility among platforms affects the equilibrium of market structure, entirely not compatible with each other means a dramatically unequal market share and profit levels.(3) A strategic model on compatibility in two-sided markets was build. The results showed that both type of the agents in favor of full compatibility. If one-way compatibility was selected, the existing agents want platform backward compatible to other side, but the new agents want platform backward compatible to themselves. The strategic of compatible was also affected by technical progress and new agents’ entrance.(4) A strategic model on agent multihoming with horizontal differentiation in two-sided markets was build. The competition strategy with different product variations was analyzed under the hypothesis that both platforms had identical technology. The product variations determined agents’multihoming decision, and platform may use lean pricing strategy when the competitiveness was not balanced.(5) A strategic model on agent multi-homing with vertical differentiation in two-sided markets was build. The system equilibrium with technology differentiation was more complicated than the case with horizontal differentiation. The results showed that agents’multihoming not only affected the price level, but the lean price structure is affected. The competitive platform can use other means of competition like exclusive contracts to change the equilibrium state.(6) A pricing model with two-sided network effect is build. The results showed that even in the absence of competition, a firm can rationally invest in a product it intends to give away into perpetuity. Either agent can be the part who should free or gain subsidization, which depends on the relative network externality benefits. And the lean price structure cannot decrease social welfare even in complete monopoly.
Keywords/Search Tags:two-sided markets, network effect, compatible strategy, multihomingstrategy, pricing strategy
PDF Full Text Request
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