Platform competition: Who benefits from multihoming?

Martin Peitz (1, 2) , Paul Belleflamme (3, 4, 5)

1 CESifo
2 Department of Economics and MaCCI, University of Mannheim
3 AMSE - Aix-Marseille Sciences Economiques
4 KEDGE Business School [Marseille]
5 CESifo

Competition between two-sided platforms is shaped by the possibility of multihoming (i.e., some users joining both platforms). If initially both sides singlehome, each platform provides users on one side exclusive access to its users on the other side. If then one side multihomes, platforms compete on the singlehoming side and exert monopoly power on the multihoming side. This paper explores the allocative effects of such a change from single- to multihoming. Our results challenge the conventional wisdom, according to which the possibility of multihoming hurts the side that can multihome, while benefiting the other side. This in not always true, as the opposite may happen or both sides may benefit.

Keywords: Network effects; Two-sided markets; Platform competition; Competitive bottleneck; Multihoming

Domains: Humanities and Social Sciences; Economics and Finance

Martin Peitz, Paul Belleflamme. Platform competition: Who benefits from multihoming?. International Journal of Industrial Organization, 2019, 64, pp.1-26. ⟨10.1016/j.ijindorg.2018.03.014⟩. ⟨hal-02137757⟩