Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282506 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10818
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We present a general and tractable oligopoly model of multi-sided platforms with endogenous side and platform choices of heterogeneous end-users, considering any mix of single-homing and multi-homing platforms and in which participating on one side could preclude doing so on others. We show the existence of a unique equilibrium number of end-users and characterize optimal platform pricing. Using the equilibrium conditions, we formally derive (across sides and platforms) switching effects that distort optimal pricing, which can lead to markups exceeding the Lerner index and rule out the classical "cross-subsidization" result. We then provide a unifying framework to analyze multi-sided platform mergers, which rationalizes mixed results from the previous literature by providing, based on the switching effects, a set of conditions that predict the upward pricing pressure post-merger. We show that while optimal pricing is determined by the nature of end-users' side choices, their platform choices are crucial for merger analysis.
Subjects: 
multi-sided markets
heterogeneous end-users
endogenous side choice
mergers of platforms
digital platforms
JEL: 
D43
G34
L11
L13
L22
L86
Document Type: 
Working Paper
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