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Discussion: Dynamic Platform Competition: Optimal Pricing and Piggybacking under Network Effects

Platform Strategy Symposium 2017. Discussion: Dynamic Platform Competition: Optimal Pricing and Piggybacking under Network Effects. Yifan Dou and D. J. Wu b y Jennifer Jie Zhang University of Texas at Arlington. Two-sided Platform. Summary of the Study.

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Discussion: Dynamic Platform Competition: Optimal Pricing and Piggybacking under Network Effects

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  1. Platform Strategy Symposium 2017 Discussion:Dynamic Platform Competition: Optimal Pricing and Piggybacking under Network Effects YifanDou and D. J. Wu by Jennifer Jie Zhang University of Texas at Arlington

  2. Two-sided Platform

  3. Summary of the Study • The development of a successfully platform businesses • the chicken-and-egg problem • Piggybacking strategy • The model considers (1) Dynamic analysis of the network evolution • How the platform owner strategically prices the two sides while building the platform over time? (2) Competitive platforms • How to differentiate with the competing platform (3) Many extensions • Threeperiods model • Asymmetric discounting factors

  4. Dynamic analysis of the network evolution • Settings: • Multi-homing providers • Single-homing customers • Symmetric duopoly • Pricing: compared with a single-period model, • on the customer side: both platforms lower period-1 price, and increase period-2 price • On the provider side: period-1 price remains unchanged, period 2 price change δ(α-β)/8. • Comments: • Equation (2): there is no within-network externality on the provider side (qdkiis independent of other providers’ number or pricing) • More results: how’s the growth of the market sizes on both sides of the platform over time? • How do the assumptions affect the subsidizing strategy?

  5. Piggybacking strategy • Findings under the dynamic asymmetric duopoly model: • Piggybacking may cause price wars between the two platforms or benefit both depending on the relative values of α and β • Comments: • Piggybacking strategy normally requires a contractual or affiliation relationship -- related to the cost structure • How does competition affect the piggybacking strategy – compared with the monopolist case

  6. Summary of Comments • From the baseline (single-period monopoly) model, add • the competition between (asymmetric) platforms • Dynamic effect (2-period, 3-period) • Nonprice controls: piggybacking • Show how the dynamic pricing, platform competition, nonprice controls affect the market size, pricing, profits, interactions between the three players in the market

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