Abstract
We explore conditions under which a multiproduct firm can profitably turn itself into a platform by "hosting rivals," i.e. by inviting rivals to sell products or services on top of its core product. Hosting eliminates the additional shopping costs to consumers of buying a specialist rival's competing version of the multiproduct firm's non-core product. On the one hand, this makes it easier for the rival to compete on the non-core product. On the other hand, hosting turns the rival from a pure competitor into a complementor: the value added by its product now helps raise consumer demand for the multi-product firm's core product. As a result, hosting can be both unilaterally profitable for the multi-product firm and jointly profitable for both firms.
Keywords
multi-sided platforms; shopping costs; bundling; competition; complementarity.;
JEL codes
- D4: Market Structure and Pricing
- L1: Market Structure, Firm Strategy, and Market Performance
- L5: Regulation and Industrial Policy
Replaces
Andrei Hagiu, Bruno Jullien, and Julian Wright, “Creating platforms by hosting rivals”, TSE Working Paper, n. 18-970, November 2018, revised March 2019.
Reference
Andrei Hagiu, Bruno Jullien, and Julian Wright, “Creating platforms by hosting rivals”, Management Science, vol. 66, n. 7, July 2020, pp. 2801–3294.
See also
Published in
Management Science, vol. 66, n. 7, July 2020, pp. 2801–3294