Value-Added Service Investment and Pricing Strategies of a Multilateral Distribution Platform Considering User-Homing in a Duopoly

• Published in: IEEE access 2019, Vol.7, p.98340-98355
• Main Authors: Zhang, Chuan, Ma, Hui-Min, Xiao, Min, Tian, Yu-Xin, Fan, Ling-Wei
• Format: Article
• Language: English
• Subjects: Advertising; Consumers; Homing; hotelling model; Investment; Multilateral distribution platform; Numerical models; Platforms; Pricing; pricing strategy; user-homing; Utility theory; value-added service investment
• ISSN: 2169-3536; 2169-3536
• DOI: 10.1109/ACCESS.2019.2929828

In reality, there are many multilateral distribution platforms that compete with each other. There are differences in user-homing: some users belong to only one platform, while some belong to multiple platforms. In addition, to attract more consumers, these platforms often invest in value-added services (VASs). In this paper, combining utility theory and Hoteling model, we investigate the VAS investment and pricing strategies of a multilateral distribution platform with considerations of user-homing and cross-group network externalities in a duopoly. We compare two universal situations: situation {S} (all consumers, advertisers and delivery staff are single-homing) and situation {M} (the consumers are single-homing while the advertisers and the delivery staff are partial multi-homing). The main results are as follows: 1) the optimal transaction fee under situation {M} is higher than that under situation {S} ; 2) the optimal delivery fee and advertising fee under situation {S} are higher than those under situation {M} ; 3) there is a threshold of the marginal VAS investment cost in both two situations, below which no VAS investing is the optimal choice; and 4) the optimal profits under situation {M} are higher than those under situation {S} .