Abstract
This paper considers the impact of service quality on two-sided markets and studies the optimal pricing problems for a monopoly platform. Considering that improving service quality commonly brings a non-linear operation cost, the platform can adjust its registration prices and service quality to balance the cost and the earnings, so as to maximize its profit. This paper shows that the monopoly platform has three kinds of strategies: offering a high service quality and charging two high registration prices; offering a lowest service quality and charging two cheaper registration prices; exiting the two-sided market when there is no profit space. Furthermore, the sensitivity analysis on the service cost parameter, the user price sensitivity and the cross-group externalities is proposed to provide some important management insights for the platform.
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