Multihoming and oligopolistic platform competition
Updated: Apr 8, 2021
In this paper co-authored with Chunchun Liu, Tat-How Teh and Junjie Zhou, we provide a general framework to analyze competition between two-sided platforms, in which buyers and sellers can multihome, and platforms compete on transaction fees charged on both sides.
We show how the implications of increased platform competition (e.g. entry) change dramatically depending on whether buyers multihome or not. Increased platform competition shifts the fee structure in favor of buyers if buyers are singlehoming, but shifts the fee structure in favor of sellers if buyers are multihoming. We generalize these results to allow for partialmultihoming, and discuss the economic implications for payment cards and ridehailing.