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Article: Innovation and price competition in a two-sided market

TitleInnovation and price competition in a two-sided market
Authors
Keywordsinnovation
price competition
two-sided markets
Issue Date2011
PublisherME Sharpe, Inc. The Journal's web site is located at http://www.mesharpe.com/mall/results1.asp?ACR=MIS
Citation
Journal Of Management Information Systems, 2011, v. 28 n. 2, p. 171-202 How to Cite?
AbstractWe examine a platform's optimal two-sided pricing strategy while considering seller-side innovation decisions and price competition. We model the innovation race among sellers in both finite and infinite horizons. In the finite case, we analytically show that the platform's optimal seller-side access fee fully extracts the sellers' surplus, and that the optimal buyer-side access fee mitigates price competition among sellers. The platform's optimal strategy may be to charge or subsidize buyers depending on the degree of variation in the buyers' willingness to pay for quality; this optimal strategy induces full participation on both sides. Furthermore, a wider quality gap among sellers' products lowers the optimal buyer-side fee but leads to a higher optimal seller-side fee. In the infinite innovation race, we perform computations to find the stationary Markov equilibrium of sellers' innovation rate. Our results show that when all sellers innovate, there exists a parameterization under which a higher seller-side access fee stimulates innovation. © 2011 M.E. Sharpe, Inc.
Persistent Identifierhttp://hdl.handle.net/10722/135649
ISSN
2015 Impact Factor: 3.025
2015 SCImago Journal Rankings: 3.036
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLin, Men_HK
dc.contributor.authorLi, Sen_HK
dc.contributor.authorWhinston, ABen_HK
dc.date.accessioned2011-07-27T01:38:33Z-
dc.date.available2011-07-27T01:38:33Z-
dc.date.issued2011en_HK
dc.identifier.citationJournal Of Management Information Systems, 2011, v. 28 n. 2, p. 171-202en_HK
dc.identifier.issn0742-1222en_HK
dc.identifier.urihttp://hdl.handle.net/10722/135649-
dc.description.abstractWe examine a platform's optimal two-sided pricing strategy while considering seller-side innovation decisions and price competition. We model the innovation race among sellers in both finite and infinite horizons. In the finite case, we analytically show that the platform's optimal seller-side access fee fully extracts the sellers' surplus, and that the optimal buyer-side access fee mitigates price competition among sellers. The platform's optimal strategy may be to charge or subsidize buyers depending on the degree of variation in the buyers' willingness to pay for quality; this optimal strategy induces full participation on both sides. Furthermore, a wider quality gap among sellers' products lowers the optimal buyer-side fee but leads to a higher optimal seller-side fee. In the infinite innovation race, we perform computations to find the stationary Markov equilibrium of sellers' innovation rate. Our results show that when all sellers innovate, there exists a parameterization under which a higher seller-side access fee stimulates innovation. © 2011 M.E. Sharpe, Inc.en_HK
dc.languageengen_US
dc.publisherME Sharpe, Inc. The Journal's web site is located at http://www.mesharpe.com/mall/results1.asp?ACR=MISen_HK
dc.relation.ispartofJournal of Management Information Systemsen_HK
dc.subjectinnovationen_HK
dc.subjectprice competitionen_HK
dc.subjecttwo-sided marketsen_HK
dc.titleInnovation and price competition in a two-sided marketen_HK
dc.typeArticleen_HK
dc.identifier.emailLin, M: linm@hku.hken_HK
dc.identifier.authorityLin, M=rp01075en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.2753/MIS0742-1222280207en_HK
dc.identifier.scopuseid_2-s2.0-81255172970en_HK
dc.identifier.hkuros186975en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-81255172970&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume28en_HK
dc.identifier.issue2en_HK
dc.identifier.spage171en_HK
dc.identifier.epage202en_HK
dc.identifier.eissn1557-928X-
dc.identifier.isiWOS:000298045200008-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridLin, M=55385535800en_HK
dc.identifier.scopusauthoridLi, S=54414395400en_HK
dc.identifier.scopusauthoridWhinston, AB=7005286020en_HK

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