Effect Analysis Of Horizontal Merger Strategy In Two-sided Market

There are many examples of industries around us that belong to the scope of two-sided market,such as electronic payment systems,instant messaging soft wares,operating systems,shopping centers,real estate agents and so on.The industries with the characteristics of two-sided market are no longer composed by just two groups which are enterprises as suppliers and users as demanders,but composed by three groups or more than three groups.The three groups are platform,supplies and demanders.The platform provides services to promote the trade between suppliers and demanders successfully.In recent years,mergers of platforms emerge one after another.Especially in 2015,there are many cases of horizontal merger between Internet platforms.For example,in August 2015,the two major online video platforms Youku and Tudou officially announced a deal to combine their companies.Two china's leading taxi-hailing Didi and Kuaidi have been merged in 2015.In addition,58 City and Ganjicom,Meituan.com and Dianping Holdings,Qunar and Ctrip also have announced to merger.Based on these cases of Internet platforms horizontal mergers,this paper portrays the transaction between suppliers and consumers into the model which is based on Armstrong?s model to analyze the horizontal mergers of two-sided markets.The main content of this paper is to analyze how the market equilibrium changes before and after the platform enterprises merger.Such as platform enterprises? profits,suppliers? profits,pricing of platform,product pricing,etc.Meanwhile,this paper analyzes what factors are influencing these variables,and how these factors affect these variables.In addition,this paper also studies the changes of social welfare before and after the merger of platform enterprises.In this paper,backward induction method is used to solve the market equilibrium.Through the discovery of the solution,the distribution of the suppliers on the platform is no longer affected the profit of the platform enterprises,the profits of suppliers,the pricing of the platform enterprises,the pricing of the products,and the social welfare.The utility of the consumer,the profit of the platform enterprise,and the profit of the suppliers are constrained by the parameters? interaction.The parameters are the transportation cost,the utility of the consumer from unit product.In addition,after the horizontal merger of the platform enterprises,the consumer's surplus has been improved,but the total profit of the platform enterprises and the total profit of the suppliers have been reduced.