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Network goods, price discrimination, and two-sided platforms

Author

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  • BELLEFLAMME, Paul,

    (CORE, Université catholique de Louvain)

  • PEITZ, Martin,

    (Universität Mannheim)

Abstract

A monopolist sells a network good to a set of heterogeneous users who all care about total participation. We show that the provider of the network good effectively becomes a two-sided platform if it can condition prices on some user characteristics. This still holds true if the network operator cannot obsoerve consumer characteristics but induces user self-selection when it offers screening contracts. In our setting, all incentive constraints are slack The use of freemium strategies emerges as a special case of versioning. Here, a base version is offered at zero price and a premium version at a positive price. Overall, the paper illustrates the close link between price discrimination in the presence of a network good and pricing by a two-sided platform.

Suggested Citation

  • BELLEFLAMME, Paul, & PEITZ, Martin,, 2020. "Network goods, price discrimination, and two-sided platforms," LIDAM Discussion Papers CORE 2020024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2020024
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2020.html
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    Cited by:

    1. Alexandre de Cornière & Andrea Mantovani & Shiva Shekhar & Alexandre de Cornière, 2023. "Third-Degree Price Discrimination in Two-Sided Markets," CESifo Working Paper Series 10618, CESifo.
    2. Decarolis, Francesco & Li, Muxin, 2023. "Regulating online search in the EU: From the android case to the digital markets act and digital services act," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    3. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    4. Cuntz, Alexander & Bergquist, Kyle, 2022. "Exclusive content and platform competition in Latin America," Information Economics and Policy, Elsevier, vol. 60(C).
    5. Mohammed Mardan & Mark J. Tremblay, 2022. "Network Effects: Betwixt and Between," CESifo Working Paper Series 10082, CESifo.

    More about this item

    Keywords

    network goods; two-sided markets; platform pricing; group pricing; menu pricing;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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