Essays on the Theory of Two-Sided Markets
Authors:   , Horváth Diána 
Published: March 2022

Several markets have emerged in which consumers and sellers interact and make transactions through an intermediary or platform. Examples include smart phones, bank cards, game consoles, shopping centers but even airports. The peculiarity of these markets is that the actors join them because the platforms have a large number of members of either their own or the other segment. Such markets are referred to in the literature as two-sided markets, which, through the development of technology, have now appeared in many forms in our daily lives. Although the analysis of two-sided markets is already extensive, it still has unexplored areas. In addition, due to their different functioning from traditional markets, they are also of great interest from a regulatory point of view, whereas the impact of the regulatory tools used may be different and may be particularly harmful in some cases. The chapters in this thesis contribute to a better understanding of two-sided markets. The results presented in the different chapters are not closely related, so they can be interpreted independently. In each chapter, duopolistic models are presented to determine the impact of platforms' product differentiation decisions, the use of public and private contracts, and the entry of the state in the market on optimal pricing. Because consumers typically do not consider when purchasing a platform's product or service that they will later purchase compatible products, they do not internalize the benefits of their future consumption, so the models presented are sequential in nature. To analyze these and determine their equilibrium, the tools of game theory are used. Depending on the type of model, the aim is to determine the subgame-perfect Nash equilibrium or the symmetric perfect Bayesian equilibrium. In the dissertation, the following results can be highlighted: 1. Profit-maximizing platforms provide users with either maximum customizability at a positive price or somewhat limited customizability at a zero price, depending on the utility from consumption. 2. Leveraging the dominance of a platform from market power is somewhat hampered by the possibility of customization. In two-sided markets, competition on one side of the market will automatically spread to the other side of the market and, if not in terms of prices, will have an impact on some other dimension. 3. In the case of public contracts, the platforms and the consumers prefer the case when sellers decide on multi-homing. 4. Beliefs are not affected by the relationship between platform-specific products for competing platforms. 5. In the case of competing platforms, the use of private contracts changes the pricing strategy of the platforms on the seller side: a positive price is charged for the previously supported segment. However, on the consumer side, a positive price is still set, in contrast to the result obtained in the literature, where consumers were supported by the platforms. In contrast, the subscription fee for private contracts is lower than for public contracts. 6. As a result of the franchise fee included in the private contract, the sellers set collusive prices. 7. Private platforms are encouraged to use public contracts, while for consumers, the preferred output is a function of the network effect, the transportation cost, and the relationship between products. 8. Neither service provider's decision to differentiate a product in the case of mixed duopoly is influenced by the competitor's decision, while on the consumer side, as a result of competition, subscription fees converge. 9. With the abolition of the state platform, the strategy of regulation of entry will lose its strength in the case of two-sided markets.