Core Brown Bag Seminar

March 29, 2023

12:50 - 13:50

CORE - Room C035

Mark Tremblay (Miami University)

Will give a presentation on

Multi-homing vs. Single-homing in Two-Sided Markets: A Cautionary Tale of Participation vs. Transaction.

 

Abstract

 

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The pioneering work on platforms and two-sided markets introduced the importance of distinguishing between single-homing and multi-homing. Instead of considering the relationship between homing decisions and participation prices, we contribute to this literature by considering how homing participation impacts transaction prices. Motivated by the example of ride-sharing where a consumer that downloads (participates on) both Lyft and Uber will choose which ever platform offers them the best option (in terms of price and wait times), we develop a model that considers how platform competition and agent homing decisions impact transaction prices across platforms. We find the development of a transaction market generates positive indirect network effects (benefits across sides) and negative direct network effects (competition within side), and that multi-homers do at least as well as single-homers. In addition, greater multi-homing on either side of the market reduces the volatility of transaction prices. In terms of types of platform fees, we find that greater multi-homing occurs when platforms utilize transaction fees instead of membership fees.