Content Quality Assurance on Media Platforms with User-Generated Content

Xingzhen Zhu (), Markus Lang and Helmut Dietl
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Xingzhen Zhu: School of Economics and Management, Nanjing University of Science and Technology

No 395, Working Papers from University of Zurich, Department of Business Administration (IBW)

Abstract: This paper develops a duopoly model of user-generated content (UGC) platforms that compete for consumers and content producers in two-sided markets with network externalities. Each platform can choose the level of investment into a content quality assurance (CQA) system and the level of advertising. Our model shows that network effects are crucial in determining the platforms' optimal strategy and the behavior (single vs. multi-homing) of their users. Specifically, we find that consumers are multi-homing and producers are single-homing when the network effects obtained by producers are weak, while the opposite is true if these network effects are strong. Moreover, our model shows that the user behavior and the network effects determine whether a platform has incentives to place ads and/or invest into CQA. In general, weak network effects induce a platform to invest into a CQA system except when consumers and producers are multi-homing. The results in our model suggests the need for platform companies to assess the magnitude of network effects on their platform to predict the behavior of their users, which in turn will determine the optimal CQA and advertising strategy.

Keywords: UGC platform; two-sided market; multi-homing; network externalities; platform investment (search for similar items in EconPapers)
JEL-codes: C72 D85 L14 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2022-10
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-pay
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