Working Paper: CEPR ID: DP13052
Authors: Lus M. B. Cabral
Abstract: I introduce a dynamic framework to analyze platforms. The (single) platform owner sets prices at the beginning of each period. Agents (buyers, sellers, readers, consumers, merchants, etc) make platform membership decisions occasionally. I show that optimal platform pricing addresses two externalities: across sides and across time periods. This results in optimal prices which depend on platform size in a non-trivial way. By means of numerical simulations, I examine the determinants of equilibrium platform size, showing that the stationary distribution of platform size may be bi-modal, that is, with some probability the platform remains very low or takes very long to increase in size. I also contrast the dynamics of proprietary vs non-proprietary (i.e., zero-priced) platforms; and consider the specific case of asymmetric platforms (one side cares about the other but not vice-versa).
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| platform size (Y20) | optimal pricing (D40) |
| number of agents on one side (C78) | optimal price charged to the other side (D41) |
| agent valuations (D46) | probability of failure to launch (C59) |
| platform effects (P39) | probability of failure to launch (C59) |
| platform ownership type (L32) | likelihood of achieving a successful launch (G17) |
| external parameters (P42) | platform success or failure (P17) |