How to regulate a dominant platform's “One-out-of-Two” arrangement?——The exclusive strategy selection of the platform under asymmetric competition

TENG Wenbo, SHEN Lu

Systems Engineering - Theory & Practice ›› 2024, Vol. 44 ›› Issue (2) : 428-443.

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Systems Engineering - Theory & Practice ›› 2024, Vol. 44 ›› Issue (2) : 428-443. DOI: 10.12011/SETP2022-3026

How to regulate a dominant platform's “One-out-of-Two” arrangement?——The exclusive strategy selection of the platform under asymmetric competition

  • TENG Wenbo1, SHEN Lu2
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Abstract

Based on the two-dimensional Hotelling model, this paper builds a game model that simultaneously considers the differentiation of platforms and merchants, to explore the adoption of different exclusive strategies by dominant platforms and the impacts of such strategy. The results show that, there are two types of exclusive strategies, namely monopoly-driven and differentiation-driven exclusivity. The monopoly-driven exclusivity can be promoted by low commission rates of strong platform, low horizontal differentiation between platforms, high vertical differentiation between platforms, and high horizontal differentiation between products; Otherwise, the differentiation-driven exclusivity will be strengthened. Second, the differentiation-driven exclusivity is also beneficial for weak platforms. To avoid the monopoly-driven exclusivity, weak platforms can increase horizontal differentiation between platforms and reduce vertical differentiation or commission rates. Finally, fierce competition among merchants can stimulate the differentiation-driven exclusivity implemented by dominant platforms, which in turn reduces competition among merchants and improves their profits. Overall, the research clarifies the drivers of exclusivity strategy of dominant platforms and distinguishes the influences of different exclusivity strategies on both platforms and merchants, providing strong policy implications for the regulation of dominant platforms and anti-monopoly in the platform industry.

Key words

platform market / exclusive strategy / asymmetric competition / anti-monopoly

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TENG Wenbo , SHEN Lu. How to regulate a dominant platform's “One-out-of-Two” arrangement?——The exclusive strategy selection of the platform under asymmetric competition. Systems Engineering - Theory & Practice, 2024, 44(2): 428-443 https://doi.org/10.12011/SETP2022-3026

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Funding

National Natural Science Foundation of China (71802036, 72272021); Education Department Foundation of Liaoning Province (LN2020J32)
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