Cournot Platform Competition with Mixed-Homing

38 Pages Posted: 13 Apr 2020 Last revised: 2 May 2022

See all articles by Mark J. Tremblay

Mark J. Tremblay

Miami University

Takanori Adachi

Kyoto University - Graduate School of Management; Kyoto University - Graduate School of Economics

Susumu Sato

Institute of Economic Research, Hitotsubashi University

Date Written: April 29, 2022

Abstract

Competition in quantity dates back to Cournot (1838) for traditional markets and Katz and Shapiro (1985) for markets with direct network effects. In this paper, we consider Cournot platform competition in two-sided markets with indirect network effects while allowing for single-, multi-, and mixed-homing allocations. We find that the markup and markdown terms that are typically found in two-sided monopoly pricing are distorted toward zero for (i) greater levels of platform competition and (ii) greater levels of single-homing. Furthermore, we extend our work to allow for a conduct parameter approach to platform competition, in the spirit of the same extension considered in traditional markets, and we develop side specific conduct parameters that depend on the underlying platform conduct as well as the homing allocation. This approach generalizes the monopoly platform Lerner indices from Armstrong (2006) and Weyl (2010) to that of platform competition across general homing allocations.

Keywords: Two-sided markets, conduct parameter, network externality, Lerner index, single-homing, multi-homing, mixed-homing

JEL Classification: D40, L10, L20, L40

Suggested Citation

Tremblay, Mark and Adachi, Takanori and Sato, Susumu, Cournot Platform Competition with Mixed-Homing (April 29, 2022). Available at SSRN: https://ssrn.com/abstract=3560566 or http://dx.doi.org/10.2139/ssrn.3560566

Mark Tremblay (Contact Author)

Miami University ( email )

208 Laws Hall
Oxford, OH 45056
United States

Takanori Adachi

Kyoto University - Graduate School of Management ( email )

36-1 Yoshida-honmachi
Sakyo-ku
Kyoto, 606-8501
Japan

Kyoto University - Graduate School of Economics ( email )

36-1 Yoshida-honmachi
Sakyo-ku
Kyoto, 606-8501
Japan

Susumu Sato

Institute of Economic Research, Hitotsubashi University ( email )

Tokyo
Japan

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