Mixed Bundling in Two-Sided Markets in the Presence of Installed Base Effects

Abstract

We analyze mixed bundling in two-sided markets where installed base effects are present and find that the pricing structure deviates from traditional bundling as well as the standard two-sided markets literature—we determine prices on both sides fall with bundling. Mixed bundling acts as a price discrimination tool segmenting the market more efficiently. Consequently, as a by-product of this price discrimination, the two sides are better coordinated, and social welfare is enhanced. We show unambiguously that platform participations increase on both sides of the market. After theoretically evaluating the impact mixed bundling has on prices and welfare, we take the model predictions to data from the portable video game console market. We find empirical support for all theoretical predictions. This paper was accepted by J. Miguel Villas-Boas, marketing.

Network effects in two-sided markets: why a 50/50 user split is not necessarily revenue optimal

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Platform Launch Strategies

“…Two major streams of research on MSPs can be distinguished. The first stream examines pricing and commission choices (Armstrong 2006;Chao and Derdenger 2013;Dou et al 2016;Eisenmann et al 2006;Parker and Van Alstyne 2005;Tirole 2003, 2006;Rysman 2009), while the second stream investigates choices with regard to platform design and investments, such as the quality of technology and rules of interaction (Bakos and Katsamakas 2008), the effects of advertisement (Tucker and Zhang 2010) and ownership model (Yoo et al 2002), business model design (Hagiu and Wright 2015), value-added services (Anderson et al 2014), competition among platforms (Caillaud and Jullien 2003), platform openness (Rysman 2009), and revenue optimization (Voigt and Hinz 2015).…”

Optimal Design on Customized Bundling Strategy of Information Goods for Customers with Two-Dimensional Heterogeneity

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