User-Generated Content Regulation for Mixed Two-Sided Platforms

43 Pages Posted: 2 Aug 2021

See all articles by Guofang Nan

Guofang Nan

Tianjin University; Tianjin University - College of Management and Economics

Ning Ding

Tianjin University

Zhiyong Li

State Key Laboratory of Media Convergence and Communication; School of Economics and Management, Communication University of China

Yong Tan

University of Washington - Michael G. Foster School of Business

Date Written: July 8, 2021

Abstract

Mixed two-sided platforms suffer from the dilemma related to the platform’s regulation of user-generated content (UGC). Strict regulation may weaken the willingness of users to continuously generate new content, whereas loose regulation may lead to massive low-quality content shares. This study develops a game-theoretic model to address the optimal level of platform regulation and the factors that influence the platform’s revenue model decisions. Two revenue models are generally adopted by a UGC platform: access price and advertisement agency. We find that the positive effect of platform regulation and the efficiency of ads has significant influence on the results related to optimal regulation level and revenue model. In particular, when the positive effect of platform regulation is minimal (maximal), regular (maximal) platform regulation is optimal. Moreover, when the efficiency of ads is positive, the platform under the advertisement agency model generates more revenue; otherwise, the platform under the access price model does. When the positive effect of platform regulation is moderate, the results for optimal regulation level and revenue model are jointly determined by the mixed influence of the efficiency of ads and the positive effect of regulation. We also find that a win-win-win scenario for platform profit, consumer surplus, and social welfare may occur. This study contributes to our understanding of the economic analysis of platform regulation. Our findings also provide insights into the strategy of platform regulation and the impact of platform regulation on a platform’s revenue model decisions.

Keywords: platform regulation, mixed two-sided markets, revenue model, advertising, agency model, economic modeling

Suggested Citation

Nan, Guofang and Nan, Guofang and Ding, Ning and Li, Zhiyong and Tan, Yong, User-Generated Content Regulation for Mixed Two-Sided Platforms (July 8, 2021). Available at SSRN: https://ssrn.com/abstract=3882469 or http://dx.doi.org/10.2139/ssrn.3882469

Guofang Nan

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Ning Ding

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Zhiyong Li (Contact Author)

State Key Laboratory of Media Convergence and Communication ( email )

No.1 Dingfuzhuang East Street Chaoyang District
Beijing, 100024
China

School of Economics and Management, Communication University of China ( email )

No.1 Dingfuzhuang East Street Chaoyang District
Beijing, 100024
China

Yong Tan

University of Washington - Michael G. Foster School of Business ( email )

Box 353226
Seattle, WA 98195-3226
United States

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