Performance investment and price decisions of two‐sided platforms under multiple quality regulation strategies

Abstract

Quality regulation is an important issue in platform governance. Quality regulation strategies can be targeted either to the platform or to the complementors. Different from a large number of previous studies on a single strategy, this paper investigates the combination of several quality regulation strategies for two-sided platforms. This paper constructs a profit maximization model to explore the optimal performance investment and price decisions of the platform under multiple quality regulation strategies. Based on the existing research, this study considers the proportion of high-quality complementors on the optimal performance decision, so that the two types of quality regulation strategies, platform-oriented and complementor-oriented, can be combined. This study finds that the optimal performance investment decision is influenced by the implementation effect of other quality regulation strategies for complementors. Therefore, platform owners should combine subsidies with quality regulation strategies when making performance investments. In addition, our results demonstrate that the combination of several quality regulation strategies can eliminate the problem caused by a certain single strategy, such as free-riding and closed platforms.

Platform investment and creators' quality choice

“…However, we suppose that the platform invests to reduce the cost of content production. Moreover, the platform's investment studied in Jing et al (2023) exerts an equal effect on both high-quality and low-quality content, whereas our paper emphasizes that the investment has a more significant impact on lowquality content. 3 Furthermore, while they focus on the monopoly scenario, our study extends to the platform's optimal special investment strategy in competitive settings.…”

“…However, our study diverges from Jing et al (2023) because we focus on different types of investment. Jing et al (2023) primarily focus on the performance investment of platforms. They suppose that the platform can invest to increase users' utility directly after they join the platform but also simultaneously incur an additional cost for creators to produce content.…”

“…However, our study supposes that the creators can endogenously make quality decisions. Closer to our paper is Jing et al (2023), who investigate platform optimal investment and pricing decisions in the context of several quality regulations. However, our study diverges from Jing et al (2023) because we focus on different types of investment.…”

“…Closer to our paper is Jing et al (2023), who investigate platform optimal investment and pricing decisions in the context of several quality regulations. However, our study diverges from Jing et al (2023) because we focus on different types of investment. Jing et al (2023) primarily focus on the performance investment of platforms.…”

“…To the best of our knowledge, we are the first to model the special investment of platforms that facilitate mainly lower-quality content production. The particular investment that we emphasize differs from the focus of studies on quality regulations (Huang et al, 2022;Jing et al, 2023). For instance, the platform might restrict access to low-quality content.…”