The Impact of Within-Platform Competition in Two-Sided Business Models

42 Pages Posted: 11 Oct 2015

See all articles by M.Mahdi Tavalaei

M.Mahdi Tavalaei

University of Surrey - Surrey Business School

Juan Santaló

Fundación Instituto de Empresa, S.L. - IE Business School

Date Written: May 1, 2015

Abstract

We analyze the impact of exogenous changes in competition within one side of a two-sided market on the optimal pricing of both sides. We take into account both its impact through indirect network externalities and its impact through higher competition in the marketplace. We find that within-platform competition increases the price charged to the other side, while its impact on the same side price is ambiguous. We test our hypotheses in the U.S. airport industry, exploiting an increase in within airport competition driven by a change in regulation. As hypothesized, we estimate that an increase of airline competition within an airport increases commercial revenues per passenger, only in airports that adopt a platform business model. We also investigate the impact of passenger type and airport pricing approach on the airport response to this exogenous change.

Keywords: Platform Competition, Two-sided Markets, Airport Industry, Network Externalitiesed

JEL Classification: M21, L93

Suggested Citation

Tavalaei, M.Mahdi and Santalo, Juan, The Impact of Within-Platform Competition in Two-Sided Business Models (May 1, 2015). Available at SSRN: https://ssrn.com/abstract=2671867 or http://dx.doi.org/10.2139/ssrn.2671867

M.Mahdi Tavalaei (Contact Author)

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 8DN
United Kingdom

Juan Santalo

Fundación Instituto de Empresa, S.L. - IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid
Spain

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