A Dynamic Pricing Model Of Two-sided Platform With Switching Cost

The research of the two-sided market is a hot topic in the field of industry organization theory.The reason why the two-sided market is different from the traditional market is the network externality arouse by the two sides connected by the two-sided market cannot be internalization.In this paper,it has reviewed the theory of the two-sided market and the current research trends then it found that the researches are focused on the single game model with the switching cost being distributed uniformly.For this gap of research,the single game model is extended to a dynamic model according to the character of the markets.In the part of the model,based on the framework of Armstrong(2006),incorporating network externality,discount factor and switching cost,this paper mainly studies how the switching cost impacts on the symmetric and asymmetric two-sided pricing model.According to compare with the equilibriums solution in two market situations,in the symmetric two-sided platform we have deride that the party with the single-homing increases with the switching cost no matter what kind of the market situation but the other party with the multi-homing does not matter with the switching cost;switching cost intensifies the competition in first period between two two-sided platforms but undercut the competition in the second period;the market share will decrease with the switching cost in the second period if it can get more than half of market share in the first period;the platforms pursuing the long strategy are determined by the network externality,discount factor and switching cost.The platform can rapidly achieve profit and possess the autonomy power to obtain the major market share when both network externality and discount factor are little.In the asymmetric two-sided platform,we have derived that the pricing with the asymmetric network externality may higher or lower the margin cost compared with the symmetric two-sided platform;the party with the single-homing occupying the major market share in the first period cannot make sure it also can obtain the major market share in the second period but the party with smaller market share in the first period can obtain the major market share when the differentiation between the platform is more than the network externality.Thus,the competition of the market share is weaker than the symmetric platform compared with the asymmetric platform.