Asymmetric pricing game in two-sided platforms

Abstract

2-sideness has been a hot topic since early this century in economic and management issues. Network effects and platform competitions are major characteristics of the 2-sided market. This paper analyses an asymmetric duopoly game with network effects in 2-sided markets. We present a 2-platform-2-provider game, in which only one of the platforms is making the pricing decision in the first stage. Both of the indirect and direct networks effects (INE & DNE) are considered in our model. We derive the equilibrium of this Platform Stackelberg Game (PSG) and also give a series of analysis. One of the important conclusions is that joint optimality hardly exists when DNE is not considered. A group of numerical test is also provided on sensitivity of each player's strategy.