Abstract
Equilibrium in a two-sided market represented by network platforms on the plane and heterogeneous agents is investigated. The advocated approach is based on the duopoly model which implies a continuum of agents of limited size on each side of the market and examines the agents’ heterogeneous utility with the Hotelling specification. The exact values were found for the equilibrium in the case of duopoly in a two-sided market with two platforms on the plane. The dependence of the platforms’ benefits on network externalities was investigated. The problem of the optimal location of platforms in the market was considered.
Highlights
Digital economy has formed a paradigm of accelerated economic development
The article is structured as follows—Section 2 describes the model and its distinctions from previous models; Section 3 finds the equilibrium in the model with identical platforms and identical agents, while Section 4 finds the solution for the model with identical groups of agents and platforms occupying different positions in the market; Section 5 investigates the optimal location of platforms; Section 6 finds the equilibrium in the general case of the pricing problem; the article is completed with the conclusions and visions for further research in the area
It follows from the symmetry of the problem that in the equilibrium the prices set by the platforms for each group of customers should be equal, they may differ for different groups, that is, (I)
Summary
Digital economy has formed a paradigm of accelerated economic development. A central position in it is occupied by network technologies, which have led to the establishment of network markets. Where in References [1,9,10] each agent is supposed to choose one of the platforms for the service, agents in the model from Reference [11] are not allowed to join any platform if they do not benefit from it It was demonstrated in the latter paper that assuming a limited market size, heterogeneous agents and endogenous demand, the optimal strategy always results in a corner solution, whether the goal is to maximize the platform’s profit or social welfare. Another important issue associated with platform economy is the optimal platform location This problem was investigated for a one-sided market by Hotelling in Reference [2], and in some models for a linear market [12,13,14], and in Reference [15] for a market on the plane. The article is structured as follows—Section 2 describes the model and its distinctions from previous models; Section 3 finds the equilibrium in the model with identical platforms and identical agents, while Section 4 finds the solution for the model with identical groups of agents and platforms occupying different positions in the market; Section 5 investigates the optimal location of platforms; Section 6 finds the equilibrium in the general case of the pricing problem; the article is completed with the conclusions and visions for further research in the area
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