Platform, Meet Apps: Pricing and Quality Under Cross-Sided Externalities

40 Pages Posted: 25 Apr 2012

See all articles by Raymond G. Sin

Raymond G. Sin

The University of Hong Kong

Jia Jia

Hong Kong University of Science and Technology

Date Written: March 28, 2012

Abstract

Our study is motivated by the observation that two-sided platforms often exercise control on access to and transactions on at least one side of the market. For example, Apple's rigorous approval process and recent policies that prohibit cross-platform app-building tools is an indication of imposing control on both access and quality of its app market. Extant literature on two-sided markets fails to accommodate platform’s interventions on participation by either side (i.e. consumers and sellers of complementary products) of the market because it typically focuses on a homogeneous population. Our work aims to bridge this gap and provides the underlying rationale for the platform firm’s governance structure and optimal pricing decisions.

Keywords: two-sided markets, externalities, quality control

JEL Classification: L11, D82, L15

Suggested Citation

Sin, Raymond G. and Jia, Jia, Platform, Meet Apps: Pricing and Quality Under Cross-Sided Externalities (March 28, 2012). Available at SSRN: https://ssrn.com/abstract=2044551 or http://dx.doi.org/10.2139/ssrn.2044551

Raymond G. Sin (Contact Author)

The University of Hong Kong ( email )

School of Business
HKU
Pok Fu Lam
Hong Kong

Jia Jia

Hong Kong University of Science and Technology ( email )

Clear Water Bay
Kowloon
Hong Kong

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