Impact of Exclusive Choice Policies on Platform Supply Chains: When Both Same-Side and Cross-Side Network Effects Exist

• Published in: Journal of theoretical and applied electronic commerce research 2024-06, Vol.19 (2), p.1185-1205
• Main Authors: Chen, Haijun, Xu, Qi
• Format: Article
• Language: English
• Subjects: Antitrust; Business competition; Competition; Economic growth; Electronic commerce; Homing; hotelling model; Internet; Investments; Market entry; Market potential; negative network effects; partial multi-homing; platform exclusivity; platform supply chain; Platforms; Policies; Pricing; Revenue; Suppliers; Supply chains
• ISSN: 0718-1876; 0718-1876
• DOI: 10.3390/jtaer19020061

This research investigates the effects of “choose-one-over-another” monopolistic strategies on two-sided platforms, analyzing the implications of such practices on network effects and platform economics through the Hotelling model. Our key findings include the following: (1) “Choose-one-over-another” policies enhance positive network effects, increasing multi-homing on the demand side but reducing overall platform revenue. These policies also intensify negative network effects, leading to higher prices for supply-side users and thereby undermining the welfare of demand-side users. (2) After antitrust interventions, platforms adjust pricing dynamically, increasing for one side and decreasing for the other in response to changes in same-side network effects, which in turn influences multi-homing behaviors and revenue impacts differently before and after the enforcement of such policies. (3) Without exclusive selection mandates, platform pricing strategies tend to lower prices for supply-side users, especially under competitive pressures or weaker positive network effects, potentially increasing platform revenue and overall supply chain welfare under certain conditions. This study highlights the critical role of regulatory oversight in curbing monopolistic platform behaviors to protect user rights and ensure market health, offering strategic guidance for platform management amidst competitive and operational challenges.