Multihoming effect on the two-sided platform of second-hand cars

Abstract

With the development of circular economy, second-hand cars are becoming important in the sustainable transportation. Due to the participation of many e-tailers, the platform competition of second-hand cars is increasingly strong in the two-sided market. Considering the network externality and product differentiation on the second-hand car platform, this study sets up a stylized model to analyze the multihoming effect for heterogeneous consumers and solves the equilibrium pricing strategy and quality decision in the online collecting market and reselling market. The numerical experiments examine the impact of two types of customer heterogeneity on the customer’s demand and platform’s profit. Our findings show that the customers close to each platform have the single-homing effect, otherwise they have the multihoming effect. As a result, the platform’s profit increases with the customer’s heterogeneity towards two second-hand platforms but is the same with the customer’s heterogeneity towards two online markets. Furthermore, we provide some managerial insights for all the stakeholders on the two-sided platform of second-hand cars.