Journal
MANAGEMENT SCIENCE
Volume 66, Issue 7, Pages 3234-3248Publisher
INFORMS
DOI: 10.1287/mnsc.2019.3356
Keywords
multisided platforms; shopping costs; bundling; competition; complementarity
Funding
- European Research Council under the European Union's Horizon 2020 Research and Innovation Programme [670494]
- Singapore Ministry of Education Social Science Research Thematic Grant [MOE2017-SSRTG-023]
- European Research Council (ERC) [670494] Funding Source: European Research Council (ERC)
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We explore conditions under which a multiproduct firm can profitably turn itself into a platform by hosting rivals, that is, 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 noncore product. On the one hand, this makes it easier for the rival to compete on the noncore 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 multiproduct firm's core product. As a result, hosting can be both unilaterally profitable for the multiproduct firm and jointly profitable for both firms.
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