Contributions

  • Hagiu, Andrei, 1977- - Contributor
  • Harvard Business School - Contributor

Publication

2008 - Harvard Business School, Boston, Massachusetts

Language

English

Word Count

8,000 words, Guess

Page Count

32 pages

Identifiers

Description

Strategic interactions between two-sided platforms depend not only on whether their decision variables are strategic complements or substitutes as for one-sided firms, but also -and crucially so- on whether or not the platforms subsidize one side of the market in equilibrium. For example, with prices being strategic complements across platforms, we show that a cost-reducing investment by one firm may have a positive effect on its rival's profits and a negative effect on its own profits when one side is subsidized in equilibrium. By contrast, if platforms make positive margins on both sides, the same investment has the regular, expected effects. Our analysis implies that the strategy space and the logic of competitive advantage are fundamentally different in two-sided markets relative to one-sided markets.

Subjects

Other Editions

  • Strategic interactions in two-sided market oligopoliesHarvard Business School2008-01-01

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