Abstract: In recent years, it has been increasingly common for platform enterprises to build ecosystems through cross-sector operations, and the strategies and impacts of such operations have attracted widespread attention from all sectors. Based on the Hotelling model, this study establishes an operation and competition model for two platforms connecting two types of users (buyers and sellers) in two markets (the core business market and the other business markets). It explores the platforms’ choices of cross-sector operation strategies and their impacts when faced with the decision to either stick to the core business or compete in other business. The study shows that: (1) The choice of a platform’s cross-sector operation strategy is jointly influenced by two effects: the price competition effect and the market expansion effect; (2) Two scenarios may both become Nash equilibria for platforms’ cross-sector operation strategies, which are both platforms choosing to compete in other business, and only one platform choosing to compete in other business while the other choosing to stick to its core business. The specific equilibrium depends on the basic utility provided by the platforms to users and the cross-network externalities among users; (3) When one or both platforms choose to compete in other business, the social welfare level may reach the highest. In contrast, when both platforms stick to their core businesses, the total social welfare level is the lowest.

Key words: two-sided markets, platform cross-sector operation, strategy selection, platform competition