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| Vertical Structure Selection of Competitive Two-Sided Platforms |
| ZHONG Li，AI Xingzheng，WANG Ganfu |
| University of Electronic Science and Technology of China, Chengdu, China |
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Abstract This study builds a game model based on competitive two-sided platforms in which the platform provides hardware products for consumers. One side of the platform is the complementary software provider, and the other side is the customer. It compares the profits of the platforms under three competitive conditions—both of the platforms are vertical separation structure, both of the platforms are vertical integration structure, and one platform is vertical integration structure, and the other one is vertical separation structure—to reveal the dynamic evolutionary process of the platforms’ vertical structure. The results show that whether the platform adopts vertical separation or vertical integration structure, under certain conditions, the platform subsidizes for the consumers who buy hardware, and with the increase of platform competition intensity, the dependence of the platform on software providers increases. When the price sensitivity coefficient of software is small, or the price sensitivity coefficient of software is large, and the hardware competitive intensity is small, the vertical integration is the dominant strategy for both of the platforms; when the price sensitivity coefficient of software and the hardware competitive intensity are both large, the vertical integration strategy is the equilibrium of the prisoner’s dilemma.
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Received: 16 October 2018
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