Superstar exclusivity in two-sided markets
52 Pages Posted: 24 Sep 2018 Last revised: 21 Jan 2021
Date Written: January 20, 2021
We study the welfare impact of exclusive input provision by a premium player (Superstar) to platforms facilitating interactions between consumers and firms. When platform competition is intense, more consumers affiliate with the platform favored by exclusivity. This mechanism is self-reinforcing as more firms follow consumer decisions and some singlehome on the platform with the Superstar. We find that the presence of cross-group externalities is key in shaping market outcomes. First, exclusivity can be welfare-enhancing. Second, vertical integration (platform-Superstar) may make exclusivity (input foreclosure) less likely than vertical separation.
Keywords: exclusivity, platforms, two-sided markets, vertical integration, network ex- ternalities.
JEL Classification: L13, L22, L86, K21
Suggested Citation: Suggested Citation