Can Multihoming of Digital Platform Users Promote Innovation?

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Journal of Central University of Finance & Economics ›› 2022, Vol. 0 ›› Issue (5) : 84-98.

LU Yuan-zhu, BAO Kai-hua, LIU Jia-long

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Abstract

The platform economy in China has exhibited the characteristic of oligopoly market structure,which may result in the shortage of innovation.A number of price comparison applications allow platforms' users to multihome more easily.Therefore,it is significant to clarify whether multihoming can promote platform innovation,find out the main factors affecting platform innovation and discuss the price effect and welfare effect of multihoming.This paper constructs a duopoly Hotelling model in which sellers' negative within-group network externality is introduced,and analyzes the market equilibrium under two environments:both sides of platform singlehoming and competitive bottleneck,and then compares the two equilibrium outcomes.The main findings are the following:(i)multihoming can promote platform innovation.This means the exclusive dealing of platforms necessarily restrains innovation and thus should be regulated;(ii)when both sides of platform singlehome,the innovation level of platforms only depends on the innovation cost parameter;while when sellers multihome,the innovation level of platforms also depends on the parameters of sellers and the cross-group network externality to buyers;(iii)sellers' multihoming usually reduces the membership fee for buyers and increases the membership fee for sellers;and(iv)when sellers multihome,buyers,sellers and platforms may be better off or worse off respectively.

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Platform competition / Multihoming / Innovation / Exclusive dealing

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LU Yuan-zhu, BAO Kai-hua, LIU Jia-long. Can Multihoming of Digital Platform Users Promote Innovation?[J]. Journal of Central University of Finance & Economics, 2022, 0(5): 84-98

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