Vertical product differentiation and two-sided markets
(2014) Economics Letters — Vol. 123, n° 1, p. 58-61 (2014)
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- Abstract
- We model platform competition in a market where products are characterized by cross network externalities. Consumers differ in their valuation of these externalities. Although the exogenous set-up is entirely symmetric, we show that platform competition induces a vertical differentiation structure that allows for the co-existence of asymmetric platforms in equilibrium. We establish this result in two set-ups: in the first one platforms commit to prices, in the second one they commit to network sizes.
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Jaskold Gabszewicz, J., & Wauthy, X. (2014). Vertical product differentiation and two-sided markets. Economics Letters, 123(1), 58-61. https://doi.org/10.1016/j.econlet.2013.12.031 (Original work published 2014)