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Mat. Teor. Igr Pril., 2018, Volume 10, Issue 1, Pages 83–98 (Mi mgta212)  

Pricing of platforms in two-sided markets with heterogeneous agents and limited market size

Zhenhua Fenga, Taoxiong Liua, Vladimir V. Mazalovb, Jie Zhengc

a Institute of Economics, Tsinghua University, Beijing, P.R. China
b Institute of Applied Mathematical Research, Karelian Research Center of RAS
c School of Economics and Management, Tsinghua University, Beijing, P.R. China

Abstract: We study a two-sided market represented by network platforms and heterogeneous agents. Our setup departs from Armstrong (2006)s monopoly model by assuming both (1) a continuum of agents of limited size on each side of the market and (2) heterogeneous utility of agents with Hotelling specification. We show that the monopolys optimal pricing strategy always results in a corner solution in terms of the equilibrium market share. We also solve for the social planners optimization problem and obtain a similar corner solution result. In addition, the exact values for the equilibrium in the case of duopoly for a two-sided market on two platforms are obtained.

Keywords: network externalities, monopoly and duopoly platforms, social optimum, heterogeneous agents, two-sided markets, Hotelling model.

Funding Agency Grant Number
National Natural Science Foundation of China 61661136002
Russian Foundation for Basic Research 16-51-55006__
Tsinghua University 20151080397


Full text: PDF file (292 kB)
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Document Type: Article
UDC: 519.833
BBK: 22.18

Citation: Zhenhua Feng, Taoxiong Liu, Vladimir V. Mazalov, Jie Zheng, “Pricing of platforms in two-sided markets with heterogeneous agents and limited market size”, Mat. Teor. Igr Pril., 10:1 (2018), 83–98

Citation in format AMSBIB
\Bibitem{FenLiuMaz18}
\by Zhenhua~Feng, Taoxiong~Liu, Vladimir~V.~Mazalov, Jie~Zheng
\paper Pricing of platforms in two-sided markets with heterogeneous agents and limited market size
\jour Mat. Teor. Igr Pril.
\yr 2018
\vol 10
\issue 1
\pages 83--98
\mathnet{http://mi.mathnet.ru/mgta212}


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