Network goods, price discrimination, and two-sided platforms
(2024) Journal of Institutional and Theoretical Economics — (2024)
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- Abstract
- A monopolist selling a network good to heterogeneous users is shown to become a two-sided platform if it can condition prices on some user characteristics or if it cannot but induces user self-selection by offering screening contracts. This shows that the availability of sophisticated pricing instruments is essential to make a platform two-sided, not the ability to distinguish separate user groups. The use of freemium strategies (which consists of offering a base version at zero price and a premium version at a positive price) emerges as a special case of versioning.
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Citations
Belleflamme, P., & Peitz, M. (2024). Network goods, price discrimination, and two-sided platforms. Journal of Institutional and Theoretical Economics. Accepted/in-press. https://doi.org/10.1628/jite-2024-0024 (Original work published 2024)