FEEM working papers "Note di lavoro" series
2005 .020

Platform Competition with Endogenous Multihoming


Authors: Roberto Roson
Series: Economy and Society
Editor: Fausto Panunzi
Type: Book
Keywords: Two-sided markets,Network externalities,Standards,Platforms,
JEL n.: D85,L10,L15,L89
JEL: Access Pricing: Theory, Practice, Empirical Evidence
Published in: Elsevier Science
Date: 2007

Abstract

A model of two-sided market (for credit cards) is introduced and discussed. In this model, agents can join none, one, or more than one platform (multihoming), depending on access prices and the choices made by agents on the opposite market side. Although emerging multihoming patterns are, clearly, one aspect of equilibrium in a two-sided market, this issue has not yet been thoroughly addressed in the literature. This paper provides a general theoretical framework, in which homing partitions are conceived as one aspect of market equilibrium, rather than being set ex-ante, through ad-hoc assumptions. The emergence of a specific equilibrium partition is a consequence of: (1) the structure of costs and benefits, (2) the degree and type of heterogeneity among agents, (3) the intensity of platform competition.

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