Competition Between Two-Sided Platforms With Quality-Based Subsidization
研究两个双边平台通过质量补贴吸引高质量供应商的竞争策略，分析补贴对定价、网络规模、质量、利润和社会福利的影响，发现补贴可能引发囚徒困境并损害供应商利益。
We study platform competition in two-sided markets, where consumers value not only the number of providers on the other side of platforms but also their quality. In this context, enhancing provider quality is critical in the competition, and platforms may incentivize high-quality providers to join the platforms with a subsidy. The article examines a two-stage competition game between two platforms who decide their quality-based subsidization strategy and access fees charged to both sides of the platforms. We derive the equilibrium outcomes of the two competing platforms under different subsidization strategy scenarios, and provide insights on the impact of subsidization on platforms’ pricing, network sizes, quality, profits, and social welfare in a competitive setting. Our study shows that in competitive environment, subsidization is a double-edged sword that can lead to a prisoner’s dilemma for platforms, despite quality improvement. We also find that while subsidization has a positive quality effect that always increases consumer surplus, it may hurt provider surplus if the same-side competition effect among providers is too strong, which negatively affects provider surplus and may drive out low-quality providers under subsidization. As a consequence, the total social welfare also hinges on the provider side competition intensity.