Bilateral Market Competition Strategic Behavior

In recent years,with the continuous development and breakthrough of the bilateral market theory and the continuous enrichment of features and pricing theory on the bilateral market,the bilateral market theory has become an important direction of the industrial organization theory. With the deepening of China’s "Internet +" policy,the e-commerce platform has been the most representative bilateral market platform business and the research of the strategic behavior on the platform competition has important practical significance. However, current researches on the e-commerce platform focus on the equilibrium price of platform vendors,and researches on the strategic behavior on the platform competition are relatively scarce. The bilateral market has significantly different features compared with the single market,such as network externality.Using the industrial organization theory of the traditional single market to explain the market behavior of the bilateral market lacks rationality. Therefore,researches on the bilateral market theory and the e-commerce platform of the bilateral market would have important theoretical significance.Based on the bilateral market theory,this paper use the classic industrial organization model- Hotelling model and improved this model.Based on the analysis of the influencing factors of the three major platform vendors strategic behavior and the analysis of the influencing factors of the pricing policy on platform vendors, we obtain three main conclusions. Firstly, if the bilateral users are full single-homed in the bilateral market platform,the sellers of both platforms provide users with asymmetric pricing behavior. The bilateral market platform charge the seller and the buyer for registration fees. The maximum profit of equilibrium exists, and there is a unique equilibrium solution.However,the prices between the two platforms influence mutually,that is,if one platform cuts prices for buyers,then the other platform will cut prices for buyers. However,the difference between the services of platforms help to alleviate such price competition of buyers and sellers. The direct network effect has not impact on the buyer but has impact on the seller. The positive or negative effects is determined by the relative number of sellers in the two platforms. In the platform that has more sellers,providing differentiated products isbeneficial to the interests of the sellers. Secondly,in the case of the implementation of the tying strategic behavior,the platform charges the seller and buyer for registration fees,the equilibrium pricing that maximizes the platform profits and balancing the number of users are related to the difference between the user utility from the tying products and service cost. It can also be understood as additional net utility that is described in trade effect theory. And,the additional net effects have opposite impacts on the seller and the buyer.Whenthe difference between the user utility from the tying products and service cost>0,that is,the additional net utility of the buyer is positive due to the tied product,registration fee can compensate the costs that are generated from the tying strategies. Meanwhile the platform can get a higher scale of sellers and buyers.The equilibrium price and the user scale of platforms that don’t implement tying strategies will be lower than that of two platforms that implement tying strategies. The tying strategies can’t guarantee escorting the platform enterprise that implements the tying strategies in the industry competition. Only when the trying product or service utility and additional costs meet certain conditions,and the cross-network externalities strength of users on both sides meet certain conditions,the platform can develop a higher price for the seller and the buyer and simultaneously get a larger market share. Thirdly,in the case of a platform as the new entrants to select the fully compatible strategic behavior,the user number and the price of new entrants is related to the user number and the price of original entrants. The balanced pricing strategies and the number of users of the fully compatible platform 2 are related to the size ofharged seller fees from the platform 1 and also has impact on the pricing strategies of buyer. Under the fully compatible strategies,the size of the equalization price is negatively correlated with network externalities platform. The fully compatible strategies can’t guarantee that the platform 2 can get the maximum effect in the competition.Only when the costs from the fully compatible strategies meet certain conditions,and both sides of the user’s network externalities strength meet certain conditions,the platform 2 can charge higher registration fees for the seller and the buyer users.