The Role of Coordination Bias in Platform Competition

Hanna Halaburda and Yaron Yehezkel ()
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Yaron Yehezkel: Faculty of Management, Tel-Aviv University

No 12-03, Working Papers from NET Institute

Abstract: This paper considers platform competition in a two-sided market that includes buyers and sellers. One of the platforms benefits from a favorable coordination bias in the market, in that the two sides are more likely to join the advantaged platform. We find that the degree of the coordination bias affects the platform's decision regarding the business model (i.e., whether to subsidize buyers or sellers), the access fees and the size of the platform. A slight increase in the coordination bias may induce the advantaged platform to switch from subsidizing sellers to subsidizing buyers, or induce the disadvantaged platform to switch from subsidizing buyers to subsidizing sellers. Moreover, in the former case the advantaged platform switches from oversupplying to undersupplying sellers, while in the latter case the disadvantaged platform switches from undersupplying to oversupplying sellers.

Keywords: platform competition; two-sided markets; coordination bias (search for similar items in EconPapers)
JEL-codes: L11 L14 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-08, Revised 2012-09
New Economics Papers: this item is included in nep-bec, nep-com, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: The Role of Coordination Bias in Platform Competition (2016)
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