PLATFORM PRICING IN MIXED TWO‐SIDED MARKETS |
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| Authors: | Ming Gao |
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| Institution: | Tsinghua University, ChinaI thank Jean‐Pierre Beno?t, Mark Armstrong, Rakesh Vohra, Glen Weyl, Alex White, and four referees for very valuable comments. I also thank Emeric Henry, Eric Maskin, Preston McAfee, David P. Myatt, Marco Ottaviani, Emre Ozdenoren, and Leonard Waverman for comments on my Ph.D. dissertation, which is the basis of this work. I thank Alexei Alexandrov, Chong‐En Bai, Stefan Behringer, Paul Belleflamme, Yong Chao, Yongmin Chen, Jaimie Lien, Xiao Liu (Tracy), Kathy Spier, Ruqu Wang, Ruhai Wu, and Wen Zhou for helpful suggestions. I acknowledge the financial assistance of Projects 20121087916 and 20151080389 supported by the Tsinghua University Initiative Scientific Research Program, Project 71203113 supported by the National Natural Science Foundation of China, and Project 20131029117 sponsored by SRF for ROCS, SEM. |
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| Abstract: | When a consumer can appear on both sides of a two‐sided market, such as a user who both buys and sells on eBay, the platform may want to bundle the services it provides to two sides. I develop a general model for such “mixed” two‐sided markets and show that a monopolist platform's incentive to bundle and its optimal pricing strategy are determined by simple formulas using familiar price elasticities of demand, which embody the bundling effect, and price‐cost margins adjusted for network externalities, which incorporate “two‐sidedness.” The optimal pricing rule in such markets generalizes the familiar Lerner formula. |
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