Competition in Multi-Sided Markets: Divide and Conquer

2011 ◽  
Vol 3 (4) ◽  
pp. 186-219 ◽  
Author(s):  
Bruno Jullien
Keyword(s):  
Price Discrimination ◽  
Price Competition ◽  
Selection Criteria ◽  
Network Effects ◽  
Divide And Conquer ◽  
Coordination Failure ◽  
Strategic Choices ◽  
Market Shares

This paper studies Stackelberg price competition in a multi-sided market. The second-mover can engage in divide-and-conquer strategies, which involve cross-subsidies between sides. The paper recovers bounds on profits, and refines the results with a selection criteria whereby consumers resolve coordination failure in favor of a focal platform. It then analyzes perfect price discrimination with network effects, and two-sided market, sheding lights on inefficiencies and strategic choices by platforms. A leading platform may refrain from selling to some side in order to soften competition, it tends to favor excessively balanced market shares and may prefer compatibility to reduce price competition. (JEL D43, D85)

COMPATIBILITY STRATEGIES FOR AN ASYMMETRIC DUOPOLY CONSIDERING NETWORK EFFECTS AND MARKET SHARES

2011 ◽  
Vol 08 (04) ◽  
pp. 615-634 ◽  
Author(s):  
FAN-CHEN TSENG ◽  
KUANG-CHENG ANDY WANG
Keyword(s):  
Price Competition ◽  
Market Failure ◽  
Network Effects ◽  
Network Effect ◽  
Second Stage ◽  
Market Shares ◽  
Key Factor ◽  
Governmental Intervention ◽  
Bertrand Price Competition ◽  
Asymmetric Duopoly

The network effect is a key factor influencing the development of e-business and technological innovation. At the same time, compatibility decisions can determine the success or failure of businesses and technologies. This study explores the compatibility strategies in the context of network effects using a two-stage game-theoretical model for a duopoly. In the first stage, two firms make their compatibility decisions, and in the second stage, two firms are engaged in Bertrand price competition. Major findings are (1) other things being fixed, two firms are more likely to be compatible with each other when they have similar market shares, (2) the compatibility decisions of firms will not be influenced by consumers' switching costs, (3) the order of their compatibility decisions will not change the resulting equilibrium, and (4) based on firms' compatibility decisions, the Bertrand price competition may still lead to market failure, necessitating governmental intervention or regulations.

A study on online platforms’ price discrimination behavior and the same-side network effects

Kybernetes ◽  
2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Can-Zhong Yao ◽  
Yi-Na Mo
Keyword(s):  
Price Discrimination ◽  
Network Effects ◽  
Competition Model ◽  
Network Effect ◽  
Pricing Strategy ◽  
Pricing Model ◽  
Content Type ◽  
Second Stage ◽  
The Cross ◽  
Efficient Allocations

Purpose The purpose of this paper is to whether competition between platforms can be effective, thus leading to efficient allocations. Design/methodology/approach Based on the classic linear Hoteling model, this paper builds a two-period competition model for two competing platforms using two variants, namely, a discrimination pricing model and a unified pricing model. Findings In the case of the discrimination pricing model, the competition is moderate, and the two platforms split the market evenly in the first stage, while both platforms tended to offer preferential treatment to new users and set higher prices for regular customers in the second stage. Compared to the unified pricing model, in the first stage, the platform can provide a higher price that depends on the cross-network effect when it implements discrimination, and thus, obtains higher profits. However, in the second stage, fierce competition leads to the release of benefits, new and regular customers obtain lower prices and the platforms lose higher profits. In the long-run, discriminatory pricing is not the best option due to lower total profits. The two platforms will implement cooperative pricing or one platform becomes dominant. Originality/value Instead of focusing on the cross-network effects, this paper emphasizes the role of the same-side network effect on price discrimination regarding the platforms’ competition. The same-side network effects are investigated in relation to a discrimination pricing strategy and compared to a unified pricing strategy. Another innovative aspect is the study of these network effects in a dynamic setting based on a two-period competition model for two platforms.

scholarly journals Price discrimination in two-sided markets

2016 ◽  
Vol 19 (1) ◽  
pp. 1-17 ◽  
Author(s):  
Kai Zhang ◽  
Weiqi Liu
Keyword(s):  
Discount Rate ◽  
Price Discrimination ◽  
Market Value ◽  
Discrimination Threshold ◽  
Lower Price ◽  
Time Increase ◽  
Exogenous Variables ◽  
Market Shares ◽  
Good For ◽  
Two Sided Markets

The use of a price discrimination strategy is an important tool in competition. It can hurt firms and benefit consumers in a one-sided market. However, in two-sided markets, its primary goal is to attract more agents or increase profits. Here, the performance of a second-degree price discrimination strategy in the context of duopoly two-sided platforms is analysed. Two exogenous variables, which include the discount rate and the price discrimination threshold, are used in order to examine whether the price discrimination strategy could help two-sided platforms achieve their objective, which is to maximise their market value. Three cases are considered, and we demonstrate that the price discrimination strategy cannot attract more agents and at the same time increase the profits; a lower price discrimination threshold cannot ensure larger markets shares; a higher discount rate is detrimental to the profit of a platform. However, this is good for its market shares. Moreover, discriminative pricing increases the competition.

scholarly journals Off-Patent Biological and Biosimilar Medicines in Belgium: A Market Landscape Analysis

2021 ◽  
Vol 12 ◽  
Author(s):  
Yannick Vandenplas ◽  
Steven Simoens ◽  
Philippe Van Wilder ◽  
Arnold G. Vulto ◽  
Isabelle Huys
Keyword(s):  
Price Competition ◽  
Quality Care ◽  
Added Value ◽  
Stakeholder Perceptions ◽  
Structured Interviews ◽  
Financing System ◽  
Market Data ◽  
Quantitative And Qualitative Research ◽  
Therapeutic Class ◽  
Market Shares

Background and objective: Best-value biological medicines may generate competition in the off-patent biologicals market, resulting in having more resources available to provide patients with access to necessary medicines while maintaining high-quality care. Belgium is a country known to have low biosimilar market shares, suggesting a malfunctioning market for off-patent biologicals. This study aims to gain an in-depth understanding of the Belgian off-patent biologicals market, by looking at the evolution in volumes and costs of the relevant products in the market.Methods: This study included a combination of quantitative and qualitative research methods. The quantitative part of this study consisted of the analysis of market data obtained by the National Institute for Health and Disability Insurance (NIHDI) for all relevant products in the Belgian off-patent biologicals market (i.e. TNF-inhibitors, insulins, granulocyte colony-stimulating factors, epoetins, rituximab, trastuzumab). In addition, for the qualitative part of this study, semi-structured interviews with Belgian stakeholders were conducted between December 2019 and March 2020.Results: Belgian market data and stakeholder perceptions suggest a suboptimal market environment for off-patent biological and biosimilar medicines. Shifts are observed after loss of exclusivities of originator biologicals toward second-generation products or new therapeutic class products, at a higher cost and often limited added value. Moreover, cost reductions for off-patent biologicals after biosimilar market entry are mainly determined by mandatory price reductions applicable to both originator and biosimilar products, and not by lower prices induced by competition. For products used in the retail setting, significant mandatory price reductions for both originator and reference products with low biosimilar volumes were pointed out as the main reasons for the lack of price competition. For products dispensed in hospitals, the hospital financing system is important. First, it does not always encourage the use of lower cost alternatives. Second, competition mainly takes place at the level of confidential discounts in tenders. Most interviewees acknowledged the lack of a competitive environment, which is not supportive of a sustainable Belgian off-patent biologicals market.Conclusion: Market data and stakeholder perceptions indicate that the sustainability of the Belgian market for off-patent biologicals is challenged. A sustainable market ensures access to biological therapies now and in the future.

How to Include Pirated Goods in the Market Boundaries for the Purposes of Antitrust Law?

2018 ◽  
pp. 3-23
Author(s):  
Anton Morozov ◽  
Andrey Shastitko
Keyword(s):  
Law Enforcement ◽  
Market Share ◽  
Network Effects ◽  
Competition Law ◽  
Counterfeit Goods ◽  
Competition Law Enforcement ◽  
Market Shares ◽  
Original Product ◽  
Counterfeit Products ◽  
The Right

In many cases of competition law enforcement counterfeit goods are not included within the product-market boundaries on an equal basis with the original product. However, existing literature highlights that illegal copies should be included in market boundaries, since from the consumer's viewpoint counterfeit is a substitute of an original good. In this article, we determine the conditions under which counterfeit products should be included either in market shares of original producers or when counterfeit manufacturers should be recognized as right holder competitors. We conclude that in case of strong network effects counterfeit product should be included in the market share of the right holder. On the contrary, when network effects are weak, pirates or counterfeit manufacturers should be considered as competitors of original product producers.

Preempting the Entry of Near Perfect Substitutes

2020 ◽  
Author(s):  
Vilen Lipatov ◽  
Damien Neven ◽  
Georges Siotis
Keyword(s):  
Price Competition ◽  
Generic Version ◽  
Differentiated Products ◽  
Quality Competition ◽  
Pharmaceutical Drug ◽  
Market Shares ◽  
Number Of Firms

Abstract When firms compete on price and quality-enhancing promotion in a market for differentiated products, entry of a nearly perfect substitute to one of such products, for example, a generic version of a pharmaceutical drug, intensifies price competition but softens quality competition. We show that consumers are likely to gain from entry when quality is relatively unimportant for them, when business stealing generated by promotion is substantial, and when products are poor substitutes. We also show that entry may be more attractive for consumers in less concentrated markets, as a smaller number of firms and asymmetric market shares may be associated with higher quality.

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