Platforms, pricing, commitment and variety in two-sided markets

This dissertation studies optimal pricing, variety and commitment by platforms operating in markets, which combine a two-sided structure with a vertical relationship.; This first essay analyzes the choice of product variety by a two-sided sponsored platform. We show that it reduces the inefficiency associated with excessive free entry under a non-sponsored or open platform in markets with differentiated products and Salop-type competition, but that, on the contrary, it exacerbates the problem of insufficient variety under non-sponsored platforms in markets with consumer preference for variety and Spence Dixit Stiglitz type competition.; The second essay studies the existence of pure strategy symmetric price equilibria in a generalized version of Salop (1979)'s circular model of competition between differentiated products, in which consumers are allowed to purchase more than one brand. When consumers are interested in purchasing an exogenously given number of varieties, there is no pure strategy symmetric price equilibrium in general. In turn, when the limitation on the number of varieties consumers purchase comes from a budget constraint, we obtain a multiplicity of symmetric price equilibria.; The third and central chapter of my dissertation proposes a model of Bertrand competition between platforms and analyzes the sustainability of dominant platform equilibria in two-sided markets with the following characteristics: (i) platforms are essential bottlenecks for buyers (users) to access the products offered by sellers (developers); (ii) sellers enter the market before buyers; (iii) only sellers can multihome; (iv) platforms can charge fixed fees on both sides and variable fees (royalties) to sellers. The most important issue arising in such a context is the ability of platforms to credibly commit to the price they will charge buyers when they set their prices for sellers. The possibility of commitment changes the pricing game substantially by enlarging the set of pricing strategies available to platforms and we investigate its effect on the sustainability of dominant platform equilibria and resulting profits, both when sellers are bound to exclusivity and when they are allowed to multihome.