A Study On Pricing Strategy For Two-Sided Platform Enterprise

Many of active entities and their products or services play an important role in our economy, to name a few, such as Alibaba in E-business, China Union Pay in payment card industry, Sony company in video game console industry, Daily Newspaper Group in newspapers and media, and the Sina,Sohu in close contact with people's daily live and so on. More importantly, these seemingly unrelated marketing actors have some common patterns and characteristics behind:they all face demand from the two (or more) different types of market, where the users interact with each other, businesses in which coordinate transactions between users (or interactions) to meet the needs of different markets, and achieve their value and earn money in meeting the needs of these markets. The company and the type of behavior described in subject of this research is Two-Sided Platform company, and the commercial system takes platform as the core business and also connects various types of market users—Two-Sided Markets is a micro-foundation of this dissertation.Two-Sided markets theory comes from the academic focus of the bilateral matching market and research in twentieth century, and until the eighty of the twentieth century it was formally presented and had been widespreadly concerned in academic and research interests. So far, Two-Sided Markets theory played a key role in the United States Department of Commerce and the European Union in ruling antitrust between Microsoft and Visa Group, and it's also used by numerous consulting firm for emerging companies to create profit model of practice and it's been widely used in traditional media (like newspapers) and new media (such as network) on discussing operation modle of competition and coexistence. At the same time as the world's fast-growing emerging markets and countries, in-depth development of the global process of economic integration, China is facing more changes and impact. The Chinese business will face a more complex pattern of international competition and business environment. In this changing and complex context of international competition, Chinese people how to correctly understand the business to seek a more appropriate business model in the fierce international competition and to seize the initiative, the Two-Sided markets and the platform company's competition theory are the effective tool to correcte and guide this analysis.The dissertation is closely related the theoretical front using the economic analysis, we seek to profoundly analyze the theoretical basis behind the act of these companies and get these rules to better guide business'practice. Specifically, first this paper abstract features of the microstructure of the two-sided market from a large number of industry practice observation—the complementarity between two markets'demand and the cross network externalities between market participants. Comparing with the single market's network externalities, we got the identification of bilateral market and the necessary and sufficient conditions for this type of market existing. Then on the basis of summarizing the sources of price theory and price determination mechanism and influencing factors of platform business, we have got the seven major factors in the platform enterprises'pricing. According to economic theory, we have built a pricing model of platform company for two-sided users in monopoly case, and in the introduction of platform competitive analysis, we have got the price determine for two-sided of the platform business, and take a comparative analysis between them. In addition, taking a affective factor of pricing—differentiation strategy as the research object,we have focused on the comparative analysis of the platform business pricing model between horizontal and vertical difference. Meanwhile, taking the platform enterprises'different ownership options—open or proprietary strategy for the study, we have got the platform enterprises' price options in different compatible strategies. Finally, we used the specific operating platform practice—video game platform as an example to verify and analyze the correctness of the conclusions drawn from the theoretical analysis.Specifically, we gave the differences between video game platform and other types' of platform in two-sided market characterizes, and made an in-depth discussion and analysis of pricing strategy for video game platform from the perspective of the two-sided market theory.In the dissertation, we took the microscopic characteristics of the two-sided markets as a theoretical background, combining the general theory to specific business practice, and taking the platform's pricing strategy as the main focus, and in each chapter we maintained the unity of model building, by theoretical study and practical demonstration, we came to the following major conclusions:1,Unlike the price behavior characteristics of profit-maximizing monopoly company in traditional market, on the basis of the cost for the platform provideing products or services to both sides of participants, the monopoly platform business' price determination for seller (buyer) must to minus the cross-network erternalities from the relative side of the buyer (seller). If the buyer's price elasticity of demand or the buyer can bring externalities to the seller is large enough, the platform may charge the buyer a price below cost or even free (that is, the price charged to the buyer is zero) or negative price (that is a price subsidy to the buyer), and vice versa.2,In the competitive equilibrium of the two competing platforms using horizontal differentiation strategy, if the sum of the cost of platform for providing products or services to the two sides and the unit conversion cost of the participants is greater than or equal to the network parameter which is affected by the opposite side, the pricing of the platform for the sellers and buyers is the minus of the sum of the cost of platform for providing products or services to the two sides and the unit conversion cost of the participants with the network parameters which is affected by the opposite side; On the other hand, when the sum of the cost of platform for providing products or services to the two sides and the unit conversion cost of the participants is smaller than the network parameter which is affected by the opposite side, the platform's pricing strategy will be subsidy buyer and get most of their profits from the seller.3,When there is competition between the two platforms which are using different strategy, in competitive equilibrium,the pricing of platforms for different quality demand of the sellers and buyers not only needs to consider the cost of providing products or services for bilateral participatants,but also needs to take the conversion costs between the two platforms of the consumers for different quality requirements and the cross network erternalities between bilateral participants or other factors into account. At the same time, the different quality competition will force the platform which provides different quality products or services to buyer and seller to charge the same price. For the competitive platform using differentiated quality, each platform's plus capacity on a bilateral market price is limited, therefore, relative to the monopoly platform, competitive platform market's plus ability is weaker, and accordingly the total price level will be lower.4,When both of the two competing platforms using proprietary strategy, platform company can charge consumer and setting accessing price for the seller to develop a balance between their access to internalize the cross network erternalities. For the two platform companies using open strategy, the influncing factors for platforms'pricing in equilibrium mainly include: switching costs of consumers, the seller's network erternalities from the unit access of consumer, the network erternalities parameter of the buyer from the seller's platform access, and the seller's unit fixed costs. When two competing platforms using different proprietary and open strategy, in equilibrium, the main affecting factors for the platform pricing of the seller and buyer is the same as both of the two companies using open platform strategy.But relatively to the two companies using same strategy, in the case of competitive equilibrium, when the two platforms using different strategy the prices charged to the buyer and the seller is more complex.5,The video game platform has the following three aspects of unique characteristics:technology platform,multi-platform and the coexistence of two operating modles of the symbiotic platform. By analyzing the actual operating of video game platform, we have gotten that in the horizontal differentiation competition strategy, there is a skewing pricing in platform's pricing strategy.For the video game platform, the platform enterprise subsidies the player (the buyer) and gets most of its profits from the game developers (the seller) side. When platform introduces low quality products or services before high-quality products or services, it uses the pricing of low quality products or services to attract enough users on the platform, so as to build a solid basis for high-quality products or services. In the competition between proprietary and open platforms, platform business uses different pricing methods. For gamers, game console platform uses the registration fee for the sale to the players and the first side game softwares, while the PC platform adoptes transaction fee for the player's game using.