Two-Part Tariff Competition between Two-Sided Platforms

39 Pages Posted: 23 Aug 2013 Last revised: 24 Feb 2014

See all articles by Markus Reisinger

Markus Reisinger

Frankfurt School of Finance & Management - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 24, 2014

Abstract

Two-sided market models in which platforms compete in two-part tariffs, i.e., a subscription and a per-transaction fee, are often plagued by a continuum of equilibria. This paper incorporates heterogeneous trading behavior of agents into the existing framework. We show that this natural and realistic extension yields a unique equilibrium that has several reasonable properties but differs from equilibria obtained through other selection criteria. The analysis also provides novel empirical predictions. We demonstrate that platforms tend to benefit from charging two-part tariffs compared to linear fees, while the utility of single-homing agents falls and the utility of multi-homing agents is unaffected.

Keywords: Two-Sided Markets, Equilibrium Uniqueness, Heterogeneous Trading Behavior, Two-Part Tariffs

JEL Classification: D43, C72, L14

Suggested Citation

Reisinger, Markus, Two-Part Tariff Competition between Two-Sided Platforms (February 24, 2014). Available at SSRN: https://ssrn.com/abstract=2314134 or http://dx.doi.org/10.2139/ssrn.2314134

Markus Reisinger (Contact Author)

Frankfurt School of Finance & Management - Economics Department ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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