How can we make a socially optimal large-scale media platform? Analysis of a monopolistic Internet media platform using two-sided market theory

Abstract

Monopolistic media platforms (MMPs) are increasingly prominent in the global Internet media industry due to the lock-in effect of the network economy. A MMP is capable of offering great utilities to its users and content providers (CPs) because such parties do not need to access multiple Internet media platforms to find their trading partners. However, a MMP operator (MMPO) can have a significant negative impact upon social welfare whenever it attempts to maximize profits via abuses of its own monopolistic power.The aims of this paper are as follows: firstly, we construct a model of a monopolistic media platform market to identify and analyze the decisions of a MMPO based on two-sided market theory. Secondly, we demonstrate how three factors – matching technology, prosumer strategy and advertising technology – impact on the size of the network and social welfare. Finally, we provide both policy makers and media platform operators (MPOs) with useful suggestions on how to promote the Internet media industry and deter MMPOs from abusing their own powers.From the analysis of the modified new model we suggest, matching technology and prosumer policy are demonstrated to increase the number of users and CPs of the platform and increase social welfare. Advertising policy is also one way of increasing social welfare, however, the necessity of monitoring of government for MMPO is proven because it may harm the utility of users.