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Chinese Journal of Management Science ›› 2021, Vol. 29 ›› Issue (5): 65-76.doi: 10.16381/j.cnki.issn1003-207x.2018.1245

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Value-added Service Quality Investment Competition Decision of Bilateral Platform in Competitive Environment

GUI Yun-miao1,2, WU Zhong1, GONG Ben-gang1   

  1. 1. School of Economics and Management, Anhui Polytechnic University, Wuhu 241000, China;
    2. School of Management, University of Science and Technology of China, Hefei 230026, China
  • Received:2018-09-04 Revised:2019-01-03 Online:2021-05-20 Published:2021-05-26

Abstract: A two-sided platform is defined as intermediaries to connect buyers and sellers, such as Alipay, JD mall. Platform economy has become an important part of Chinese new era. With the intensification of competition among platform enterprises, the subsidy strategy can no longer be a useful means for platform to expand basic users and improve users' loyalty. Platform invested value-added services, which can improve the value and experience of the platform. Therefore, it has become a key issue to choose value-added services for bilateral platforms in a competitive environment.
Based on the Hotelling model, the influence of investment on network externality, investment cost, profit and users' utilities is explored. Considering three different user-homing conditions, the two-sided game model is developed. Through comparative analysis, it is found that when the two-sided users are single-homing, whether the platform one-sided or two-sided value-added service quality investment is performed, high quality investment is the dominant strategy of the two platforms. When only one-sided users is multi-homing, if value-added services investments on consumers side are performed, low quality investment is the dominant strategy of the two platforms; if value-added service investments on suppliers side or two-sided are performed, high quality investment is the dominant strategy of the two platforms. When two-sided users are multi-homing, whether one-sided or two-sided value-added service quality investment is performed, low quality investment is the dominant strategy of the two platforms.
The results have some practical implications for two-sided platforms' investment strategies. Firstly, more attention should be paid to improve users' experiences and avoid subsidy war. Secondly, investing value-added services should become the most important way to improve customers' loyalty. Finally, making use of bilateral market characteristics of platform investment, it can reduce barriers to entry the right users' side to promote competitive advantage.

Key words: two-sided market, platform competition, value-added service quality, Hotelling model

CLC Number: