Abstract:

As data emerges as a pivotal driver of the robust growth of the platform economy， the competition for data resources among many online platforms becomes more and more intense. Focusing on the impact of data dominance on online platforms， a two-stage game model is employed to explore the data investment and user pricing decisions of competing platforms. Three scenarios are considered： monopoly， differentiated competition with multi-homing advertisers and differentiated competition with single-homing advertisers. The results show that the market attractiveness of data investment always depends on the tradeoff between the marginal effect of data investment on users and the data trading value in all scenarios. However， in competitive environments where data differentiation exists， data advantage does not always incentivize the platform to increase the level of data investment or pricing decisions. Instead， data investment strategies are shaped by the platform's capacity to monopolize the data market. With the increasing effect of data investment on consumers' utility， the data investment strategy of competing platforms will undergo four stages of evolution： from “no investment” to “platform investment with data disadvantage，” onward to “both investments”， and eventually culminating in “platform investment with data advantage”. When compared to the scenario involving multi-homing advertisers， the single-homing advertisers setup yields a diminished level of data investment alongside elevated prices. More importantly， the single-homing behavior of advertisers amplifies the platform's dual competition encompassing both user engagement and data， thereby dampening the attractiveness of investment while simultaneously boosting the platform's potential to monopolize the data market.

Key words: two-sided markets, data advantage, online platform, data investment, pricing