Cooperative service strategy for competitive platforms under multi-homing

Abstract

Facing fierce market competition, increasingly platforms are trying to cooperate with competitors on services. Although the cooperative service strategy has been widely adopted by platforms, the feasibility of the cooperative service strategy and its impact on platform operation decisions are still ambiguous. This paper investigates the impact of service investment on platforms and the service strategy choice of the competing platforms in the scenarios of symmetric service costs and asymmetric service costs respectively. According to whether platforms cooperate on services, we divide service strategies into the non-cooperative service strategy and the cooperative service strategy. We demonstrate that service investment mitigates price competition on the service investment side while intensifying it on the other side when users are allowed to be multi-homing. We identify the feasible range of the cooperative service strategy; the platforms adopt the cooperative service strategy when the difference in service costs is small. Otherwise, the platform with the cost advantage refuses to cooperate. Counterintuitively, although the cooperative service strategy can alleviate the service competition of platforms, the more intense the platform's competition for users, the lower the possibility of platforms adopting the cooperative service strategy.