Research On The Two-Sided Platform's Strategic Investment Decision And Pricing Mechanism

A two-sided platform is defined as a kind of intermediate enterprise connects two different types of users.They need to gain access to the same platform in order to be able to interact and the platform gets profits from their transactions.This format is becoming increasingly important in the view of both theorists and practitioners in the contemporary economy.In practice,two-sided platforms,such as the third-party payment platform,the social media platform,and the ride-hailing platform,have become an integral part of people's everyday lives.Platform economy has developed rapidly over the last few years and the two-sided platforms' competitive strategies have become more and more diversified in the fierce market competition environment.Research on two-sided markets mainly focuses on skewed pricing strategies.The investment behavior of platforms in practice is widely observed,but research regarding investment of two-sided platforms is relatively scarce.Pricing mechanisms and other competitive strategies in two-sided market are quite different from those in a traditional one-sided market.Traditional competitive strategies,such as low-cost strategy,differentiation strategy have been unable to explain and guide the operation of two-sided platform enterprises.So,to further study the competitive strategies and pricing mechanism of the two-sided platforms,a two-sided platform investment behavior is combined with pricing strategies to construct a game-theoretic model in monopoly and duopoly competitive market.This thesis explores the influence of investment strategy on pricing level,market share and profits,and the moderating effect of network externalities and investment cost.Our results can be concluded into three aspects.First,whether in monopoly or duopoly competitive two-sided markets,the investment marginal cost and resources conversion rate of buyers have the same influence mechanism on market equilibrium.High investment cost or low resources conversion rate will reduce the optimal investment level of the two-sided platform.Second,network externalities make the two-sided platforms' investment decision different from the traditional enterprises.The cross-group network externalities increase the investment efficiency of two-sided platform in seizing market share,and lead to the transitivity of investment effects in both markets structure.However,in terms of profits,different market structure shows different characteristics.In monopoly market,the stronger the network externalities,the more profits the platforms will gain.In competitive market,the platforms' profits appear decrease with the increasing of network externalities.It shows that the increase of competition will reduce the platforms' motivation to gain more profits through investment activities and restrain the “winner-takes-all” scenario in two-sided markets.Finally,this thesis highlights the importance of inherent utility.How to price the input resources has similar principle in both monopoly and competitive markets.It is not only depended on the relative size of cross-group network externalities but also the inherent utility provided by platforms' basic functions.The results have some practical implications for two-sided platforms and public regulatory agencies.First,more attention should be paid to promote users' service and avoid blind price war.Second,traditional pricing rules should be abandoned and investment strategy enterprises should be re-examined from the perspective of two-sided markets.Third,for the transitivity of investment effect on two-sided markets,the enterprises can avoid investment barriers on one side and invest on the other side to reach the organizational goals indirectly.Finally,reducing barriers to entry appropriately would be a feasible way to promote market competition and reduce monopolies.