Research On Strategies Of Expanding User-base In Two-sided Markets

With the development of information and internet technology,there exists a kind of platform enterprises that not only provide products or services to users on both sides,but also promote interactions on the platforms in real economic life.Such platforms are called “two-sided platforms”,and the markets connected by the platform enterprises are known as “two-sided markets”.Two-sided markets are quite prevalent now,including many new economic sectors,such as Google in search engine,Taobao in online shopping industry,Facebook in interpersonal relationship,Alipay in electronic payment industry,and mobile communications,media platforms in close contact with people's live,which have been an important position in the modern economic system.Through the detailed study of two-sided markets theory,it will further improve and enrich industrial organization theory and provide a theoretical reference for platform enterprises to develop reasonable commercial strategies.Therefore,it has important theoretical significance and practical guiding value.At present,there are many domestic and foreign research literatures about pricing of two-sided markets,competitive strategies and pricing of specific platform industry.In the two-sided markets,due to the existence of cross network externalities between two-sided users,it is important for two-sided platforms to deal with how to expand user-base.With the development of two-sided or multi-sided platforms,the user network of similar platforms will often cross,overlap,the platforms will form a direct competition for users.Although some pricing strategies,such as appropriate price subsidies to the users,are the effective strategies to balance both sides of the user-base.But the price competition,is not conducive to the orderly development of the whole industry.With constantly improvement of the service level of the platform,the cost increases gradually and the implementation of low prices may increase the operational risk of the platform.Therefore,this paper discusses other competitive strategies than pricing strategies to expand the user-base,mainly through broadening therange of servicing users,ie not only servicing users of own platform,but also servicing users of competing platform,finally making the platform broadening its users coverage and improving fame and influential power of own platform as well as attracting more users to anticipate into platform.Therefore,this paper discusses the different aspects of expanding user-base of the two-sided platform.Are these strategies of broadening the range of servicing users of the platform certainly able to improve the profit of the platform and how do they impact on users,platform and even society?However,research on this aspect is rare and not systematic at present and it need to further study and analyze.This paper mainly consider about three strategies of expanding user-base with relevant theoretical tools like game theory,management and industrial economics,deeply analyzing interconnect,platform merger and bundling in turn with the size of broadening the range of servicing users as the main line of research.Firstly,defining vital related concepts of two-sided markets,thoroughly analyzing the difference from traditional one sided market,systematically studying the theoretical framework,summarizing domestic and foreign theories research on two-sided markets and putting out the shortcomings of current research,then on this basis proposing the problems needed to be solved and research frame in this paper.Secondly,successively analyze the three main strategies of expanding user-base with the size of broadening the range of servicing users as the main line.Given the competition between platforms and the difference in technical levels,the paper analyzes the effect of technology innovation on interconnection between platforms.We find out that the price and profit of high technology platform are higher than low technology platform's.Technology innovation by the low technology platform can increase its profit and improves competitiveness in the market,but the opportunities for interconnection between platforms are reduced.Interconnection is less likely happened in market with closely matched competitors,but may encourage a leading platform to accommodate entrants.Thirdly,analyzes the pricing mechanism problem of two-sidedplatforms under vertical merger and horizontal merger structures and the equilibrium solutions obtained by solving the profit maximization problem under different situations are compared and analyzed.Research results show that in the aspect of pricing,the price of complements to consumers is the lowest under vertical merger,but highest under horizontal merger,while the users' access fee is related to the intensity of network externalities.In the aspect of profit,the highest platform profit is obtained under vertical merger.When network externalities intensity is small,the platform profit is the lowest under horizontal merger.In addition,with the increase of network externalities intensity,the platforms profit and the users' access fee are higher,while the price of complementary products for consumers is lower.Fourthly,another strategy of bundling to expand user-base is studied.Given the difference between competitive platforms and the consumers' partial multi-homing,the paper constructs a game model to analyze the effect of mixed bundling(reduce to tying)and pure bundling on pricing structure,market share and total social welfare.Research results show that bundling can raise the platform's market share on both sides and increase the profit in platform competition situation.Moreover,when the equilibrium implicit subsidy is small,the platform's profit is more higher under tying than pure bundling,while pure bundling is more beneficial to the welfare of the whole society than tying and has an exclusive role.Finally,applying this general research conclusions into specific operational platform —e-commerce online shopping platforms,we analyze the strategies of expanding user-base of the industry by using the research theory based on expounding the development process of online shopping platforms and analyzing its two-sided markets characteristics,and examines how these strategies will bring about competition between online shopping platforms,The theoretical conclusions derived from the previous chapters are verified.