Information and two-sided platform profits
By: Andrei Hagiu, Hanna Halaburda
Contributors: Halaburda, Hanna; Harvard Business School
Series: Working paper / Harvard Business School -- 12-045; Working paper (Harvard Business School) -- 12-045
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston
Language: eng
Number of pages: 29
Work titles: Expectations and two-sided platform profits
Description: We study the effect of different levels of information on two-sided platform profits--under monopoly and competition. One side (developers) is always informed about all prices and therefore forms responsive expectations. In contrast, we allow the other side (users) to be uninformed about prices charged to developers and to hold passive expectations. We show that platforms with more market power (monopoly) prefer facing more informed users. In contrast, platforms with less market power (i.e., facing more intense competition) have the opposite preference: they derive higher profits when users are less informed. The main reason is that price information leads user expectations to be more responsive and therefore amplifies the effect of price reductions. Platforms with more market power benefit because this leads to demand increases, which they are able to capture fully. Competing platforms are affected negatively because more information intensifies price competition.
Notes: "December 2011. (Revised March 2013, November 2013.)"--Publisher's Web site.

Revision of Expectations and two-sided platform profits.

Includes bibliographical references (pages 27-29).