The Role of Coordination Bias in Platform Competition

Journal of Economics & Management Strategy 25, no. 2 (2016): 274–312

NET Institute Working No. 12-03

64 Pages Posted: 24 Oct 2012 Last revised: 4 Jul 2019

See all articles by Hanna Halaburda

Hanna Halaburda

Bank of Canada; New York University (NYU); CESifo (Center for Economic Studies and Ifo Institute)

Yaron Yehezkel

Coller School of Management , Tel-Aviv University

Multiple version iconThere are 2 versions of this paper

Date Written: October 26, 2015

Abstract

This paper considers platform competition in a two-sided market that includes buyers and sellers. One of the platforms benefits from a favorable coordination bias in the market, in that for this platform it is less costly than for the other platform to convince customers that the two sides will coordinate on joining it. We find that the degree of the coordination bias affects the platform's decision regarding the business model (i.e., whether to subsidize buyers or sellers), the access fees and the size of the platform. A slight increase in the coordination bias may induce the advantaged platform to switch from subsidizing sellers to subsidizing buyers, or induce the disadvantaged platform to switch from subsidizing buyers to subsidizing sellers. Moreover, in such a case the advantaged platform switches from oversupplying to undersupplying sellers, and the disadvantaged platform switches from undersupplying to oversupplying sellers.

Keywords: platform competition, two-sided markets, coordination bias

JEL Classification: L11, L14

Suggested Citation

Halaburda, Hanna and Yehezkel, Yaron, The Role of Coordination Bias in Platform Competition (October 26, 2015). Journal of Economics & Management Strategy 25, no. 2 (2016): 274–312; NET Institute Working No. 12-03. Available at SSRN: https://ssrn.com/abstract=2164339 or http://dx.doi.org/10.2139/ssrn.2164339

Hanna Halaburda (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Munich
Germany

Yaron Yehezkel

Coller School of Management , Tel-Aviv University ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

HOME PAGE: http://www.tau.ac.il/~yehezkel/

Register to save articles to
your library

Register

Paper statistics

Downloads
123
Abstract Views
602
rank
224,407
PlumX Metrics