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Cited by 526Digital Platforms and EconomicsAuction Theory and ApplicationsMerger and Competition Analysis

Pricing and commitment by two-sided platforms

Hagiu, Andrei·2006·The RAND Journal of Economics
DOI 10.1111/j.1756-2171.2006.tb00039.x
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Abstract

I study pricing and commitment by platforms in two-sided markets with the following characteristics: (i) platforms are essential bottleneck inputs for buyers and sellers transacting with each other; (ii) sellers arrive before buyers; and (iii) platforms can charge both fixed fees and variable fees (royalties). I show that a monopoly platform may prefer not to commit to the price it will charge buyers at the same time it announces its seller price if it faces unfavorable seller expectations. With competing platforms, commitment makes the existence of an exclusive equilibrium (in which sellers register with only one platform) less likely, but it has no impact on multi-homing equilibria (in which sellers support both platforms) whenever these exist.

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Crossref · 10.1111/j.1756-2171.2006.tb00039.x

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7 of 7 references verified0 citation errors · 0 not checkable

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  • In many platforms, at least one side of the platform must be subsidized to overcome the chicken and egg problem and enable growth and subsequent adoption on the other side.

    “In many platforms, at least one side of the platform must be subsidized to overcome the chicken and egg problem (Caillaud & Jullien, 2003;Hagiu, 2006) and enable growth and subsequent adoption on the other side.”

    From Digital platform ecosystems in flux: From proprietary digital platforms to wide-spanning ecosystems (2023) · cites this paper as Hagiu, 2006

  • During digital platform formation, the focal platform firm focuses on establishing a platform-based product or service, creating fundamental technologies, and attracting users on various sides of the platform.

    “During digital platform formation, the focal platform firm focuses on establishing a platform-based product or service, creating fundamental technologies, and attracting users on various sides of the platform (Caillaud & Jullien, 2003;Hagiu, 2006).”

    From Digital platform ecosystems in flux: From proprietary digital platforms to wide-spanning ecosystems (2023) · cites this paper as Hagiu, 2006

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Authors
Hagiu, A.
Affiliations
Harvard University (US)
Corresponding author
Hagiu, Andrei
ORCID
Hagiu, Andrei
Venue
The RAND Journal of Economics
Publisher
Wiley
Published
2006-09
Volume
37
Issue
3
Pages
720-737
ISSN
  • 0741-6261 (ISSN-L)
  • 1756-2171
DOI
10.1111/j.1756-2171.2006.tb00039.x
OpenAlex
W1993700489
Cited by
526
References
7
Citations by year
2026: 14 · 2025: 29 · 2024: 26 · 2023: 33 · 2022: 24 · 2021: 34 · 2020: 45 · 2019: 46 · 2018: 39 · 2017: 24 · 2016: 22 · 2015: 23 · 2014: 29 · 2013: 35 · 2012: 23
FWCI
47.50
Type
journal article
Language
en
Open access
closed
Licence
doi.wiley.com/10.1002/tdm_license_1.1 (tdm, 3287 d)
Locations
  • The RAND Journal of Economics (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Digital Platforms and Economics
  • Social Sciences › Decision Sciences › Management Science and Operations Research › Auction Theory and Applications
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
Keywords
two-sided markets, platform pricing, commitment, multihoming, fixed fees, royalties, platform competition

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