A model of two-zoned network for platform competition

Abstract

Platform-mediated network has received increasing attention from researchers and practitioners in recent years. The literature on this topic has been mainly derived from the model of two-sided network (2SN) where producers and consumers comprise the two sides and are considered the main user groups. Inadequacy, however, has been noticed where the two-sided network model cannot fully explicate the dynamics of platform competition. A more comprehensive model can help firms better understand the nature of platform competition so as to make informed decisions in this evolving landscape. By adding a higher dimension of “zone” to the existing “side” dimension, we propose a new two-zoned network (2ZN) model. A 2ZN consists of two 2SNs and the platform at the core functionally serves as a nexus connecting the two networks. In addition, we propose three properties of 2ZN (namely, zone parallelism, service diversity in the pay zone, and latent payment in the free zone) to help further explore two-zoned networks. For illustration purposes, four real business cases are identified, analyzed, and discussed to exhibit the applicability of the proposed 2ZN model. With additional insights into the structure and inner working of platform-mediated networks through the new 2ZN model, managers can make better-informed decisions to cope with platform competition. The case analysis and related discussion suggest promising opportunities for future research.