Strategies Bundling Bilateral Market

In the world of economy, a considerable part of intermediary industries belong to thescope of two-sided market, such as credit card company, e-commerce platform, shoppingplaza, web portal, real-estate agent.etc. Due to the situation that the two-sided platformmaking deal with the participators from both sides at the same time, the profit pattern inthis type of market is definitely different with the traditional unilateral firms. In general,bilateral platform would like to adopt some specific marketing tools for the purpose ofattracting a wider range of upstream suppliers and consumers to join, such as tying arelated product or service. Bundling is treated as a common marketing tool and we can findit everywhere. For example, large-scale shopping plaza sets underground parking garage inconsideration of consumers’ friendliness and comfort, credit card issuer bank ask itsapplicants for holding debit card from the same brand of bank. E-commerce platformtrading need to bind with a third party payment software from its brand company.etc. As aintermediate place, on one hand, the bilateral market platform pays for the constructioncost, connecting the downstream consumers with the upstream commodity suppliers,meanwhile,bringing them convenience and efficiency, on the other hand, the two-sidedplatform make profit from the two groups.Different from the negative impact of bundling strategy in the unilateral market, theeffect of bundling strategy in bilateral market may be positive. The nature of bundling isnot as simple as price discrimination, because the situation considered by the bilateralmarket platform is much more complicated than traditional enterprises.Therefore, I willmake a comparative analysis of the game results between pre-bundled and post-bundedbilateral markets. The result will be more inclined to "leverage effect".The principal line of this paper is as follows: in a two-sided market, there exists twoequal platform, the upstream commodity suppliers access each platform in a single-homingway and downstream consumers access each platform in multi-homing way, after usingbundling strategy, the utility of the upstream side and the downstream side and platformitself are changed. This article find that when the platform vendors have monopoly powerin another product market, and if the monopoly goods be bounded to platform sales withordinary commodities, the advantaged platform will rob a lot of consumers who are notbelong to it in the original process, and at the same time it will charge higher registrationfees from both of upstream manufacturers and downstream consumer groups. The bundling platform’s profit will increase, on the contrary, the competing platform’ profit will bedecreased. In terms of consumer side, consumer surplus is widespread lootingaccompanied by bundling strategy. As a result, the utility of each group and the changes oftotal social welfare is constrained by the parameters’ interaction, three parameters are: thebilateral market’s cross-network externalities, the transportation cost and the distribution ofupstream suppliers in each platform.So the conclusion of this paper is that as a marketing tool, bundling can expand thevendor scope of monopoly power from one product market to another, and cover moreconsumers’scope to promote its platform of both network effect and profit.Although behind the complex and changeable environment, the commercial operationmethod of economic cases cannot present an uniform circumstance with the theoreticalmodel, business strategy and economic analysis is more or less moving on the samedirection. In any industry, any enterprise which gained monopoly will think ahead aboutwhether to enter other industries the same industrial chain, such as SF express, the mostoutstanding in the express industry of China, have the motion to join in the platform forsome fresh goods which are required to high-speed delivery.