Platform Competition: Who Benefits from Multihoming?

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Paul Belleflamme, Martin Peitz
International Journal of Industrial Organization
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.
Developed by Paolo Gittoi