The Research On Pricing And Competition Strategies Of Platform Enterprise Based On Two-sided Markets Theory

Lots of active platform entities nowadays play an important role in the economy. They all face demands from more than two different types of markets, where the users interact with each other. These markets, we called, are two-sided markets. Examples of two-sided markets readily come to mind, such as bank payment card system, operating system, media industry and electronic transaction platform. Comparing to traditional single markets, the platforms in two-sided markets maximize their profits through owning a reasonable price structure and higher installed base.The theory of two-sided markets emerged in 1980s with its root deep in the management issues and economic phenomena. It was utilized by economists when making an argument about antitrust issues of Microsoft and Visa against. It also guided numerous startups to create innovative business models in new economics. Moreover, it helped in the discussion of competition between old vs. new media. Nowadays, confronted with so complex competition environment, entrepreneurs should find some tools to help themselves making decisions. The theory of two-sided markets is no doubt an effective analysis tool.This paper caught up with the forefront of the economic theory, offering a thorough analysis of the pricing and competition strategies of platform enterprise under a normal economic research methodology. The script of this paper is:Based on lots of practices, the micro-structure of two-sided markets is illustrated, i.e. complementary demand among markets, cross-group externalities, and supply features. Based on the achieved pricing theory of two-sided markets, we attempt to give a better understanding about character of platform firms'pricing. Particularly, the cross-subsidization is analyzed due to its ubiquitous existence in two-sided markets. And given the non-negative pricing hypothesis, the bundling strategy is discussed on its impact for the two-sided markets. And then talk about the competition under the platforms with the two-sided markets, especially the problems of pricing strategy, compatibility choices and multi-homing. Besides the research on general two-sided markets issues, we analyze the special character of EC market under that framework. And we discuss the issues of EC'pricing scheme, the efficiency of the industry, and social welfare.