Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1568
We study monopolistic and competitive pricing in a two-sided market where agents have incomplete information about the quality of the product provided by each platform. The analysis is carried out within a global-game framework that offers the convenience of equilibrium uniqueness while permitting the outcome of such equilibrium to depend on the pricing strategies of the competing platforms. We first show how the dispersion of information interacts with the network effects in determining the elasticity of demand on each side and thereby the equilibrium prices. We then study informative advertising campaigns that increase the agents' ability to estimate their own valuations and/or the distribution of valuations on the other side of the market.
two-sided markets dispersed information platform competition