Digital Business Models and Quality Investment

Marie-Laure Allain, Marc Bourreau and Pierre-Francois Darlas ()
Additional contact information
Pierre-Francois Darlas: Telecom Paris, Institut Polytechnique de Paris, CREST, France

No 2025-16, Working Papers from Center for Research in Economics and Statistics

Abstract: In this paper, we study the competition between two horizontally di erentiated digital platforms. Each platform can adopt either a user-funded or an ad-funded business model. The platforms also invest in service quality to attract users. We nd that which business model is more conducive to quality investment depends on the relative value of the platforms services to the marginal multi-homing user compared to the value of the marginal user to advertisers. From a consumer welfare perspective, in equilibrium, platforms tend to adopt the user-funded business model too often and insu ciently di erentiate their business models. Our results also show that regulatory interventions in digital markets aiming at mitigating market power of ad-tech rms or improving privacy protection can induce shifts in business models, with potentially ambiguous e ects on consumer welfare.

Keywords: Platform; two-sided markets; business model; quality investment. (search for similar items in EconPapers)
JEL-codes: L13 L41 L42 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2025-12-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://crest.science/RePEc/wpstorage/2025-16.pdf CREST working paper version (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to crest.science:443 (certificate verify failed) (http://crest.science/RePEc/wpstorage/2025-16.pdf [301 Moved Permanently]--> https://crest.science/RePEc/wpstorage/2025-16.pdf)

Related works:
Journal Article: Digital business models and quality investment (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crs:wpaper:2025-16

Access Statistics for this paper

More papers in Working Papers from Center for Research in Economics and Statistics Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Murielle Jules Maintainer-Email : murielle.jules@ensae.Fr.