Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Pricing models of two-sided markets incorporating service quality

Pricing models of two-sided markets incorporating service quality This paper aims to study the pricing problems on the two-sided market for cases of monopoly and duopoly competition, specifically investigating the impact of platform service quality on the market. Theoretical analysis and computational studies are conducted to investigate the impact of different parameters on the system outcomes.Design/methodology/approachMathematical formulations are proposed for cases of monopoly and duopoly competition. For monopolistic market, the optimal pricing and service quality strategies are obtained using mathematical programming method. For duopolistic market, the equilibrium outcomes are derived by game theory. Sensitivity analysis and numerical studies are also adopted to investigate the impact of different parameters.FindingsFor monopolistic market, the platform will provide a low service quality when the service cost parameter is large. However, when the cost parameter is small, the platform provides a higher service quality and higher registration prices. Furthermore, the sum of the optimal prices is proportional to the service quality and inversely proportional to the user price sensitivity. For duopolistic market, the competitive equilibrium prices exist under a certain condition. The determinants of equilibrium prices are the gap between the service qualities of two platforms and the cross-group externalities.Originality/valueFor monopolistic market, this paper specifies the role of platform service quality in determining the platform’s pricing strategy. For duopolistic market, this paper presents a market sharing mechanism between two platforms and explores the equilibrium pricing strategies for platforms with different service quality level. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Kybernetes Emerald Publishing

Pricing models of two-sided markets incorporating service quality

Kybernetes , Volume 48 (8): 24 – Sep 23, 2019

Loading next page...
 
/lp/emerald-publishing/pricing-models-of-two-sided-markets-incorporating-service-quality-Ayo3FfD1UT
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0368-492X
DOI
10.1108/k-06-2018-0287
Publisher site
See Article on Publisher Site

Abstract

This paper aims to study the pricing problems on the two-sided market for cases of monopoly and duopoly competition, specifically investigating the impact of platform service quality on the market. Theoretical analysis and computational studies are conducted to investigate the impact of different parameters on the system outcomes.Design/methodology/approachMathematical formulations are proposed for cases of monopoly and duopoly competition. For monopolistic market, the optimal pricing and service quality strategies are obtained using mathematical programming method. For duopolistic market, the equilibrium outcomes are derived by game theory. Sensitivity analysis and numerical studies are also adopted to investigate the impact of different parameters.FindingsFor monopolistic market, the platform will provide a low service quality when the service cost parameter is large. However, when the cost parameter is small, the platform provides a higher service quality and higher registration prices. Furthermore, the sum of the optimal prices is proportional to the service quality and inversely proportional to the user price sensitivity. For duopolistic market, the competitive equilibrium prices exist under a certain condition. The determinants of equilibrium prices are the gap between the service qualities of two platforms and the cross-group externalities.Originality/valueFor monopolistic market, this paper specifies the role of platform service quality in determining the platform’s pricing strategy. For duopolistic market, this paper presents a market sharing mechanism between two platforms and explores the equilibrium pricing strategies for platforms with different service quality level.

Journal

KybernetesEmerald Publishing

Published: Sep 23, 2019

Keywords: Pricing; Monopoly

References