First-Party Content and Coordination in Two-Sided Markets

Andrei Hagiu () and Daniel Spulber
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Andrei Hagiu: Harvard Business School, Harvard University, Boston, Massachusetts 02163

Management Science, 2013, vol. 59, issue 4, 933-949

Abstract: The strategic use of first-party content by two-sided platforms is driven by two key factors: the nature of buyer and seller expectations (favorable versus unfavorable) and the nature of the relationship between first-party content and third-party content (complements or substitutes). Platforms facing unfavorable expectations face an additional constraint: their prices and first-party content investment need to be such that low (zero) participation equilibria are eliminated. This additional constraint typically leads them to invest more (less) in first-party content relative to platforms facing favorable expectations when first- and third-party content are substitutes (complements). These results hold with both simultaneous and sequential entry of the two sides. With two competing platforms---incumbent facing favorable expectations and entrant facing unfavorable expectations---and multi-homing on one side of the market, the incumbent always invests (weakly) more in first-party content relative to the case in which it is a monopolist. This paper was accepted by Bruno Cassiman, business strategy.

Keywords: two-sided platforms; platform strategy; technology; first-party content (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (79)

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