2021
Working Paper
HBS Working Paper Series

Exclusive Dealing and Entry by Competing Two-Sided Platforms

By: Cristian Chica, Kenneth Chuk and Jorge Tamayo

Format:Print
| Language:English
| Pages:72

Abstract

We study competition between horizontally differentiated platforms offering exclusive and non-exclusive contracts to one side of the market (content providers). The introduction of non-exclusive contracts in addition to exclusive contracts softens the competition for content providers between platforms, as they have more tools to extract content providers’ surplus. Users on the other side (consumers) pay the same price that they would pay in the exclusive-only game but gain access to new content provided by multi-homing content providers, increasing their surplus. Multi-homing content providers’ surplus increases, while it decreases for those who single-home. Platforms charge more to exclusive and non-exclusive content providers, increasing their profits. As platform competition increases, platforms’ profits increase if the network benefit on the consumers’ side is high, so that the price effect dominates the market share effect. Finally, we show that platforms cannot deter entry by offering exclusive–non-exclusive contracts. In certain circumstances, platforms will jointly deviate from the exclusive–non-exclusive game and offer only exclusive prices in order to deter entry.

Keywords

Two-sided Markets; Platform Price Competition; Network Externalities; Exclusive Contracts; Multi-homing; Two-Sided Platforms; Price; Competition; Contracts

Citation

Chica, Cristian, Kenneth Chuk, and Jorge Tamayo. "Exclusive Dealing and Entry by Competing Two-Sided Platforms." Harvard Business School Working Paper, No. 21-092, March 2021.