This thesis consists of three essays on the economics of platform competition. Theoretical approaches are undertaken to analyse the functioning of a two-sided market from different perspectives. The first chapter studies the impacts of a bandwagon, snob or congestion effects and sellers’ competition in the presence of multihoming. Results demonstrate that all market participants, including buyers, sellers, and platforms, exhibit a preference for multihoming over singlehoming scenarios, irrespective of whether only one side or both sides of the market are multihoming. Whilst multihoming equilibrium fees are comparatively higher, the resulting aggregate surpluses on both market sides are also higher. Furthermore, the increased number of participants in the market provides platforms with additional fees, further boosting their profits.
The second chapter presents a novel framework for studying platform competition by examining the mechanisms through which asymmetric platforms attract agents, particularly how they appeal to buyers. To capture the strategic interactions between platforms, a two-stage game is considered in which heterogeneous platforms simultaneously choose features on buyers' side in the first stage and membership fees in the second stage. Results show that buyers’ decisions to join a platform are influenced not only by membership fees and cross-network effects but also by the range of functionalities offered by the platform.
The third chapter develops a two-period dynamic model of platform competition, in which buyers have imperfect information concerning the quality of the platforms. Consequently, buyers must first experience platforms’ features before deciding to switch to a different intermediary. A general insight is developed into the strategies employed by platforms in setting their membership fees and the implications this has on determining market shares, considering the presence of cross-group network effects and quality uncertainty on buyers’ side. This framework allows endogenisation of buyers' switching decisions and asymmetric platforms in equilibrium.
