Quality Differentiation and Optimal Pricing Strategy in Multi-Sided Markets

Arbeitspapier

This paper analyzes the generalized quality differentiation model in multi-sided markets with positive externalities, which leads to new insights into the optimal pricing structure of the firm. We find that quality differentiation for users on one side affects not only the side involving differentiation but also the other side due to cross-side network externalities, thereby affecting the pricing structure of multi-sided firms. In addition, quality differentiation affects the strategic relationships among all the choice variables for the platform, enabling the platform to strategically use quality differentiation to raise its profits.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9267

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Vertical Restraints; Resale Price Maintenance; Quantity Discounts
• Subject: multi-sided market ; quality differentiation ; platform business strategies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kim, Soo Jin ; Pal, Pallavi
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/245448
• Last update: 10.03.2025, 11:41 AM CET