One-side value-added service investment and pricing strategies for a two-sided platform

Fostering digital platform innovation: From two to multi‐sided platforms

“…Furthermore, along with several studies on the pricing mechanism (e.g., Armstrong, ), the chance to leverage the reward mechanism has been considered as one of the ways to increase participation on one side to attract greater participation on the other side (Lu, Goldsmith, & Pagani, ). In the same vein, the role of value‐added services (VAS) has been considered as a strategy to increase participation and profit for the entire platform (Dou, He, & Xu, ).…”

Online Reviews Matter: How Can Platforms Benefit from Online Reviews?

“…The third related research is the growing literature on mechanism design in the information system. Researchers in information systems not only design and evaluate new systems in a business context [33], but also focus on how to price the services of the mechanisms [13,[34][35][36][37][38][39][40][41]. For instance, Amit Basu et al examine the online and authentication services for matching-seekers, and study how the matching platform should price its search and authentication services [13].…”

“…For instance, Amit Basu et al examine the online and authentication services for matching-seekers, and study how the matching platform should price its search and authentication services [13]. Guowei Dou et al consider that the investment for one side would affect the utility of users on two sides, thus affecting the demand and profit of the platform, and then they investigate one-side value-added services investment and pricing strategies for a two-sided platform [36]. Guillaume Roger and Luis Vasconcelos introduce a pricing mechanism, whereby a two-sided platform charges transaction and registration fees to overcome the moral hazard on the sellers' side [37].…”

Platform Launch Strategies

“…Subsidizing one side of the market to attract the 'money side' of the MSP until the critical inflection point is reached is a common strategy (Eisenmann et al 2011;Fath and Sarvary 2003). This can take different forms, such as price cuts, free usage, offers of investment incentives (Ackerberg and Gowrisankaran 2006;Hagiu 2009;Muzellec et al 2015), offers of valueadded services (Dou et al 2016), technical support for development programming (Schilling 2003), and even paying users as a means of attracting them (Evans 2003). An MSP can therefore afford to sustain a loss on the 'subsidy side' as long as the loss is recovered on the 'money side' (Armstrong and Wright 2007).…”

“…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).…”