First-party content and coordination in two-sided markets

Andrei Hagiu*, Daniel Spulber

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

100 Scopus citations

Abstract

The strategic use of first-party content by two-sided platforms is driven by two key factors: the nature of buyer and seller expectations (favorable versus unfavorable) and the nature of the relationship between first-party content and third-party content (complements or substitutes). Platforms facing unfavorable expectations face an additional constraint: their prices and first-party content investment need to be such that low (zero) participation equilibria are eliminated. This additional constraint typically leads them to invest more (less) in first-party content relative to platforms facing favorable expectations when first- and third-party content are substitutes (complements). These results hold with both simultaneous and sequential entry of the two sides. With two competing platforms-incumbent facing favorable expectations and entrant facing unfavorable expectations- and multi-homing on one side of the market, the incumbent always invests (weakly) more in first-party content relative to the case in which it is a monopolist.

Original languageEnglish (US)
Pages (from-to)933-949
Number of pages17
JournalManagement Science
Volume59
Issue number4
DOIs
StatePublished - Apr 1 2013

Keywords

  • First-party content
  • Platform strategy
  • Technology
  • Two-sided platforms

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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