• Media type: Report; E-Book
  • Title: A cautionary note on using hotelling models in platform markets
  • Contributor: Jeitschko, Thomas D. [Author]; Kim, Soo Jin [Author]; Yankelevich, Aleksandr [Author]
  • imprint: Düsseldorf: Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), 2018
  • Language: English
  • ISBN: 978-3-86304-285-1
  • Keywords: Two-Sided Market ; D21 ; L0 ; First Mover Advantage ; D43 ; Hotelling Model
  • Origination:
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  • Description: We study a Hotelling framework in which customers first pay a monopoly platform to enter the market before deciding between two competing services on opposite ends of a Hotelling line. This setup is common when modeling competition in Internet content provision. We find that standard taken-for-granted solution methods under full market coverage break down, and that in the unique full-coverage equilibrium, the competing service providers set substantially lower prices. Standard methods and prices are restored by giving service providers the first move.
  • Access State: Open Access