Font Size: a A A

A Study On Vertical Integration Strategy Of Platform Manufactures In Two-sided Markets

Posted on:2014-02-02Degree:MasterType:Thesis
Country:ChinaCandidate:M M HaoFull Text:PDF
GTID:2249330398960390Subject:Industrial Economics
Abstract/Summary:PDF Full Text Request
The last two years, E-commerce platforms have constantly changed, for example, TAOBAO increased the technical service fee in2011, and this act led to a troublesome that a large number of small and medium-sized sellers attacked big sellers. This phenomenon drew great attention to the competitive strategy of platform manufacturers in two-sided market. For the purpose of maintaining dominant market position and high profits in two-sided markets, platform in the monopoly position may carry out strategic behaviors such as vertical integration, tying and exclusive dealings.To analyze the competitive strategies of platform manufacturers, we can’t only consider market structures which are competition or monopoly, but also think about cross-group network externalities and demand complementarities of two-sided markets and so on. Platform manufacturers can solve "chicken-and-egg" questions through asymmetric pricing and subside to two-sided users, and they can take some measures, including vertical Integration, tying and exclusive dealing, so as to get higher profits or gain a competitive march on rivals. In this paper, I focus on analyzing the effect of the vertical integration strategy taken by platform manufacturers.Through building a model of vertical integration of monopoly platform and competitive platform, this paper analyzes how the vertical integration process influences the users and competitors in two-sided markets. In monopoly platform, the integration of platform and some sellers will cause squeezing effect and crowding out effect to other sellers. The strategy of charging lower price from the sellers that belong to the integrated portfolio can attract other sellers to join the integrated portfolio, and meanwhile, consumers also tend to buy products or services from the integrated portfolio. In the competitive platform, we can compare the profit changes of platform providers before and after the vertical integration, and the utility function of sellers and buyers. When a platform manufacturer takes vertical integration with some sellers, the profit of this platform manufacturer will be greater than these platform manufacturers which don’t take vertical integration. What’s more, this measure will urge other sellers to join this platform which taking vertical integration in order to reduce service fee.When the market towards equilibrium, platform manufactures and sellers of the two-sided markets will exit in the form of integration and all sellers will only belong to one platform.
Keywords/Search Tags:Two-Sided Markets, Monopoly Platforms, Competitive PlatformsVertical Integration
PDF Full Text Request
Related items