Abstract
Network effects typically generate multiple equilibria in two-sided markets. To overcome the methodological challenge of selecting an appropriate equilibrium, this paper shows that many two-sided market models are weighted potential games, and therefore a refinement of Nash equilibrium justified by many theoretical and experimental studies, potential maximization, pins down an equilibrium. Under potential maximization, platforms often subsidize one side and charge the other, i.e., divide and conquer. The primary determinant of which side to subsidize/monetize is cross-side network effects. This divide-and-conquer strategy implies that platforms are often designed to favor the money side much more than the subsidy side.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
