Platform optimal capacity sharing: Willing to pay more does not guarantee a larger capacity share

Chokri Aloui and Khaïreddine Jebsi

Economic Modelling, 2016, vol. 54, issue C, 276-288

Abstract: In this paper, we study how a mediating business organization or platform allocates a fixed capacity (such as space, infrastructure, or bandwidth) between two distinct but interdependent groups of consumers (sides) that suffer from congestion. The analysis highlights that the platform's capacity sharing management depends not only on the participation levels of both sides but also on the externalities running between them. It is not true that a group's capacity share uniquely depends on its size. Besides, we argue that the platform may not assign the smallest capacity share to the least congestion-sensitive group. Finally, we establish a management rule that a platform's decision maker, e.g. trade fair manager, clinic owner, airport planner, or Internet Service Provider, should adopt when she is confronted with a capacity sharing trade-off between interdependent parties.

Keywords: Two-sided market; Monopoly; Cross-externalities; Congestion; Capacity sharing function (search for similar items in EconPapers)
JEL-codes: D42 L14 L81 L86 M21 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:54:y:2016:i:c:p:276-288

DOI: 10.1016/j.econmod.2016.01.003

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