Platform Subsidy with Endogenous Network Effects
نویسندگان
چکیده
This paper examines a monopoly platform’s strategy in offering subsidies based on a microfoundation of trades on the two-sided platform. A key feature is the endogenous network effects that arise from sellers’ and buyers’ entry and trading decisions. The model also captures both horizontal and vertical dimensions of product differentiation, which directly affect these decisions. The results illustrate that the platform substitutes differentiation in the horizontal dimension for that in the vertical dimension in its optimal decision. We show that it is never optimal for the platform to subsidize sellers in the absence of vertical differentiation. When products are vertically differentiated, the platform may subsidize sellers if the market is sufficiently liquid. Vertical differentiation and characteristics of a liquid market mitigate the negative same-side network effect among sellers and allow the platform to internalize higher gains to offset the subsidy. Regardless of vertical differentiation, buyer-side subsidy is possible given an illiquid market, in which seller competition is less severe. However, the degree of vertical differentiation works against the buyer-side subsidy. Our findings connect platform pricing strategies to market and user characteristics, which applies directly to managerial decisions and deepens theoretical understanding.
منابع مشابه
EFFECTS OF CHANGING AGRICULTURAL SUBSIDIES ON PRODUCTION AND EXPORTS IN IRAN
Subsidy is a tool used by governments as a form of financial aid to support specific economic sectors. Today subsidy is common in several countries, such as Iran due to different political and economic reasons. This study has examined the effects of changing agricultural subsidies on production and exports. For this purpose, a computable general equilibrium model (CGE) for the year 2011 was use...
متن کاملEffects of Awareness of Fertilizer Subsidy on the Yield of Crops among Rural Farmers in Ghana
The study examines the effects of awareness of fertilizer subsidy on the yield of crops among rural farmers in Ghana. Random sampling was used to select six communities and 10 households per community. They include Bawku, Navrongo, Tolon kumbungu and Walewale from the Northern part and Ejura and Atebubu in the Southern part of Ghana. Primary data were collected from the sampled household by ...
متن کاملDo Targeted Hiring Subsidies and Profiling Techniques for Long-term Unemployed Reduce Unemployment?
To reduce equilibrium unemployment targeted hiring subsidies and profiling techniques for long-term unemployed are often recommended. To analyze the effects of these two instruments, our model combines two search methods: the public employment service and random search, jobseekers choose between an active and a passive search strategy, while labour market policy has two options available. First...
متن کاملSocial networks and interactions in cities
We examine how interaction choices depend on the interplay of social and physical distance, and show that agents who are more central in the social network, or are located closer to the geographic center of interaction, choose higher levels of interactions in equilibrium. As a result, the level of interactivity in the economy as a whole will rise with the density of links in the social network ...
متن کاملMiR-96 induced non-small-cell lung cancer progression through competing endogenous RNA network and affecting EGFR signaling pathway
Objective(s): Non-small cell lung cancer (NSCLC) has become a serious global health problem in the 21st century, and tumor proliferation and metastasis are the leading causes of death in patients with lung cancer. The present study aimed to verify the function of miR-96 and miR-96 in relation to competing with endogenous RNA regulatory network in NSCLC progression inc...
متن کامل