Superstars in Two-Sided Markets: Exclusives or Not?
53 Pages Posted: 24 Sep 2018 Last revised: 4 Nov 2019
Date Written: November 1, 2019
This article studies incentives for a premium provider (Superstar) to offer exclusive contracts to competing platforms mediating the interactions between consumers and firms. When platform competition is intense, more consumers affiliate with the platform favored by Superstar exclusivity. This mechanism is self-reinforcing as firms follow consumer decisions and some join the favored platform only. Exclusivity always benefits firms and might eventually benefit consumers. A vertical merger (platform-Superstar) makes non-exclusivity more likely than if the Superstar was independent. The analysis provides novel insights for managers and policymakers and it is robust to several variations and extensions.
Keywords: exclusive contracts, platforms, two-sided markets, market power
JEL Classification: L13, L22, L86, K21
Suggested Citation: Suggested Citation