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Platform Competition With Endogenous Homing

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  • Thomas D. Jeitschko
  • Mark J. Tremblay

Abstract

We consider two‐sided markets in which consumers and firms endogenously determine whether they single‐home, multi‐home, or exit the market. We find that the competitive bottleneck allocation in which consumers single‐home and firms multi‐home is always an equilibrium. In addition, we find equilibria with multi‐homing and single‐homing on each side of the market. However, unlike the standard pricing result where the side that multi‐homes faces higher prices, we find that lower prices coincide with multi‐homing: agents find multi‐homing more attractive when faced with lower prices. We also show that endogenous homing can induce straddle pricing which deters price undercutting between platforms.

Suggested Citation

  • Thomas D. Jeitschko & Mark J. Tremblay, 2020. "Platform Competition With Endogenous Homing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(3), pages 1281-1305, August.
    • Handle: RePEc:wly:iecrev:v:61:y:2020:i:3:p:1281-1305
    DOI: 10.1111/iere.12457
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    References listed on IDEAS

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    8. Simon P. Anderson & Øystein Foros & Hans Jarle Kind, 2018. "Competition for Advertisers and for Viewers in Media Markets," Economic Journal, Royal Economic Society, vol. 128(608), pages 34-54, February.
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    11. Jeitschko, Thomas D. & Tremblay, Mark J., 2014. "Homogeneous platform competition with endogenous homing," DICE Discussion Papers 166, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Susan Athey & Emilio Calvano & Joshua S. Gans, 2018. "The Impact of Consumer Multi-homing on Advertising Markets and Media Competition," Management Science, INFORMS, vol. 64(4), pages 1574-1590, April.
    13. Simon P. Anderson & Øystein Foros & Hans Jarle Kind, 2018. "Competition for Advertisers and for Viewers in Media Markets," Economic Journal, Royal Economic Society, vol. 128(608), pages 34-54, February.
    14. Jay Pil Choi & Yusuke Zennyo, 2019. "Platform market competition with endogenous side decisions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 73-88, January.
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    Cited by:

    1. Shekhar, Shiva, 2017. "Homing choice and platform pricing strategy," DICE Discussion Papers 247, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Pauline Affeldt & Elena Argentesi & Lapo Filistrucchi, 2021. "Estimating Demand with Multi-Homing in Two-Sided Markets," Discussion Papers of DIW Berlin 1965, DIW Berlin, German Institute for Economic Research.
    3. Maximilian Julius Krome & Ulrich Pidun, 2023. "Conceptualization of research themes and directions in business ecosystem strategies: a systematic literature review," Management Review Quarterly, Springer, vol. 73(2), pages 873-920, June.
    4. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    5. Argentesi, Elena & Buccirossi, Paolo & Calvano, Emilio & Duso, Tomaso & Marrazzo, Alessia & Nava, Salvatore, 2021. "Merger Policy in Digital Markets: An Ex Post Assessment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 17(1), pages 95-140.
    6. Christian Bach & Robert Edwards & Christian Jaag, 2023. "Postal Platform Pricing with Limited Consumer Attention," Working Papers 202318, University of Liverpool, Department of Economics.
    7. Jeitschko, Thomas D. & Kim, Soo Jin & Yankelevich, Aleksandr, 2021. "Zero-Rating and Vertical Content Foreclosure," Information Economics and Policy, Elsevier, vol. 55(C).
    8. Tremblay, Mark J. & Adachi, Takanori & Sato, Susumu, 2023. "Cournot platform competition with mixed-homing," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    9. Ding, Xiaoshu & Qi, Qi & Jian, Sisi, 2024. "Truthful online double auctions for on-demand integrated ride-sourcing platforms," European Journal of Operational Research, Elsevier, vol. 317(3), pages 737-747.
    10. Pauline Affeldt & Elena Argentesi & Lapo Filistrucchi, 2021. "Estimating Demand with Multi-Homing in Two-Sided Markets," Working Papers wp1165, Dipartimento Scienze Economiche, Universita' di Bologna.
    11. Lu, Qiuyu, 2022. "Content Licensing with Endogenous Homing," MPRA Paper 115314, University Library of Munich, Germany.
    12. Jan Frederic Nerbel & Markus Kreutzer, 2023. "Digital platform ecosystems in flux: From proprietary digital platforms to wide-spanning ecosystems," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-20, December.
    13. Qiuyu Lu & Noriaki Matsushima, 2023. "Personalized pricing when consumers can purchase multiple items," ISER Discussion Paper 1192, Institute of Social and Economic Research, Osaka University.
    14. Dyskeland, Ole Kristian & Foros, Øystein, 2023. "Multihoming and market expansion: Effects on media platforms’ pricing and content creation incentives," Economics Letters, Elsevier, vol. 232(C).
    15. Hui Li & Feng Zhu, 2021. "Information Transparency, Multihoming, and Platform Competition: A Natural Experiment in the Daily Deals Market," Management Science, INFORMS, vol. 67(7), pages 4384-4407, July.
    16. Calvano, Emilio & Polo, Michele, 2021. "Market power, competition and innovation in digital markets: A survey," Information Economics and Policy, Elsevier, vol. 54(C).
    17. Oksana Loginova & X. Henry Wang & Qihong Liu, 2022. "The impact of multi-homing in a ride-sharing market," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(1), pages 239-254, August.
    18. Zhou, Yaqian & Yang, Hai & Ke, Jintao & Wang, Hai & Li, Xinwei, 2022. "Competition and third-party platform-integration in ride-sourcing markets," Transportation Research Part B: Methodological, Elsevier, vol. 159(C), pages 76-103.
    19. Mark J. Tremblay, 2016. "Vertical Relationships within Platform Marketplaces," Games, MDPI, vol. 7(3), pages 1-11, July.
    20. Kyeonggook Francis Park & Robert Seamans & Feng Zhu, 2021. "Homing and platform responses to entry: Historical evidence from the U.S. newspaper industry," Strategic Management Journal, Wiley Blackwell, vol. 42(4), pages 684-709, April.
    21. Wu, Jie & Li, Yunbing & Dong, Yu & Zha, Yong, 2023. "Sponsored data: A game-theoretic model with consumer multihoming behaviour," European Journal of Operational Research, Elsevier, vol. 307(2), pages 731-744.
    22. Yannis Bakos & Hanna Halaburda, 2020. "Platform Competition with Multihoming on Both Sides: Subsidize or Not?," Management Science, INFORMS, vol. 66(12), pages 5599-5607, December.
    23. Takanori Adachi & Susumu Sato & Mark J. Tremblay, 2023. "Platform Oligopoly with Endogenous Homing: Implications for Mergers and Free Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 71(4), pages 1203-1232, December.
    24. Wang, Zhiqi & Zhang, Yufeng & Jia, Bin & Gao, Ziyou, 2024. "Comparative Analysis of Usage Patterns and Underlying Determinants for Ride-hailing and Traditional Taxi Services: A Chicago Case Study," Transportation Research Part A: Policy and Practice, Elsevier, vol. 179(C).

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