Platform Competition: Who Benefits from Multihoming?

25 Pages Posted: 1 Dec 2017

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Martin Peitz

University of Mannheim - Department of Economics

Date Written: November 2017

Abstract

Competition between two-sided platforms is shaped by the possibility of multihoming. If users on both sides singlehome, each platform provides users on either side exclusive access to its users on the other side. In contrast, if users on one side can multihome, platforms exert monopoly power on that side and compete on the singlehoming side. This paper explores the allocative effects of such a change from single- to multihoming. Our results challenge the conventional wisdom, according to which the possibility of multihoming hurts the side that can multihome, while benefiting the other side. This is not always true: the opposite may happen or both sides may benefit.

Keywords: competitive bottleneck, multihoming, network effects, platform competition, Two-sided markets

JEL Classification: D43, L13, L86

Suggested Citation

Belleflamme, Paul and Peitz, Martin, Platform Competition: Who Benefits from Multihoming? (November 2017). CEPR Discussion Paper No. DP12452. Available at SSRN: https://ssrn.com/abstract=3079419

Paul Belleflamme (Contact Author)

CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Martin Peitz

University of Mannheim - Department of Economics ( email )

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Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

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