| Two-sided market theory in recent years has become the latest hot spot and research direction in the theory of industrial organization. It has been constantly enriched and developed during this decade. Two-sided market is widespread in modern life, for example, the bank credit card system, online recruitment platform, the E-commerce platform and search engine. But the traditional unilateral market theory cannot give the interpretation to industry featured with cross-network externalities. Therefore, the emergence of two-sided market theory to explain such phenomena has important theoretical and practical significance.In the network-based industries with two-sided market characteristics, it is the incompatible behavior of platform vendors with each other led to user’s multi-homing behavior. Although multi-homing behavior has caused much inconvenience to the consumer, only a handful of industries under the national mandatory requirements are compatible with each other. Other industries with similar characteristics are not subject to government intervention. In the two-sided market theory, single-homing or multi-homing of users is very important to the competitive of the platform vendors. Therefore, studying the impact of compatibility of the platform vendors’options to the user’s behavior and platform vendors’welfare is particularly urgent.Based on two-sided market theory, through the analysis of the impact of compatibility of the platform vendors to the user’s behavior as well as the social welfare, I draw conclusions as follows. First, when the platform vendors are completely incompatible with each others, both sides of the user’s choice depends on the comparison of cross network externalities coefficient in both sides of the user and the degree of differentiation between platform vendors. Second, when the platform vendors are completely incompatible with each other and the users on both sides are single-homing, differences in the degree of platform can improve the platform price and profit, the increase of the cross-network externalities will reduce the price and profits of the platform vendor, platform vendors will be divided equally on both sides of the user market. Third, when the platform vendors are completely incompatible with each other and only one side of the users is single-homing, to the platform vendors, the degree of differentiation between the multi-homing and cross-network externality coefficient determines the respective market share of the multi-homing subscriber in equilibrium conditions, and the platform vendors pricing level on both sides of the user’s size cannot be compared. Fourth, when the platform vendors are completely compatible and both sides are multi-homing, the equilibrium price of the same side of the user, market share and platform profits are equal. The degree of the differences of the platform can improve the pricing level to two-sided market users. The influence of cross-network externalities between two sided users to platform pricing and profit cannot be determined. Five, although the multi-homing behavior of the user is able to increase consumer surplus, consumer surplus and the overall level of social welfare will greatly be improved when the platform vendors are completely compatible with each other. Therefore, when the platform vendors require customers to pay a higher fee for service or platform vendors compatible cost is much lower, social regulation should not ignore the compatibility issues between the platform vendors for the existence of large number of the multi-homing users in the market. In contrast, social regulators should pay more attention to the option of compatibility issues between platform vendors. |
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