Journal of the Korean Operations Research and Management Science Society (한국경영과학회지)

The Korean Operations Research and Management Science Society (한국경영과학회)
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An Application of Evolutionary Game Theory to Platform Competition in Two Sided Market

양면시장형 컨버전스 산업생태계에서 플랫폼 경쟁에 관한 진화게임 모형

  • Received : 2010.11.11
  • Accepted : 2010.12.07
  • Published : 2010.12.31
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Abstract

This study deals with a model for platform competition in a two-sided market. We suppose there are both direct and indirect network externalities between suppliers and users of each platform. Moreover, we suppose that both users and suppliers are distributed in their relative affinity for each platform type. That is, each user [supplier] has his/her own preferential position toward each platform, and users [suppliers] are horizontally differentiated over [0, 1]. And for analytical tractability, some parameters like direct and indirect network externalities are the same across the markets. Given the parameters and the pricing profile, users and suppliers conduct subscription game, where participants select the platform that gives them the highest payoffs. This game proceeds according to a replicator dynamics of the evolutionary game, which is simplified by properly defining gains from participant's strategy in the subscription game. We find that depending on the strength of these network effects, there might either be multiple stable equilibria, at which users and suppliers distribute across both platforms, or one unstable interior equilibrium corresponding to the market tipping in favor of either platform. In both cases, we also consider the pricing power of competing platform providers under the framework of the Stackelberg game. In particular, our study examines the possible effects of the type of competition between platform providers, which may constrain the equilibrium selection in the subscription game.

Keywords

References

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