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5 - Platform Pricing

Published online by Cambridge University Press:  05 October 2021

Paul Belleflamme
Affiliation:
Université Catholique de Louvain, Belgium
Martin Peitz
Affiliation:
Universität Mannheim, Germany
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Summary

In this chapter, we examine how a platform, which has passed the launch phase, prices its services. In Section 5.1, we provide a general introduction to platform pricing by describing the different types of prices that a platform might choose, by going through a simple numerical example, and by discussing why the platform’s decisions may diverge from what would be optimal from a social point of view. We then address, in Section 5.2, the platform pricing problem in a general way to understand how the platform optimally chooses prices so as to manage network effects, and why this often leads to pricing structures such that different groups of users end up paying quite different prices; we also address the question whether platforms should charge users only for accessing the platform or also for the transactions they conduct on the platform. In Section 5.3, we extend the analysis by considering one-sided pricing, the presence of within-group network effects, and differential pricing. Finally, in Section 5.4, we examine the link between pricing and the way users form their expectations regarding the participation of other users.

Type
Chapter
Information
The Economics of Platforms
Concepts and Strategy
, pp. 140 - 184
Publisher: Cambridge University Press
Print publication year: 2021

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  • Platform Pricing
  • Paul Belleflamme, Université Catholique de Louvain, Belgium, Martin Peitz, Universität Mannheim, Germany
  • Book: The Economics of Platforms
  • Online publication: 05 October 2021
  • Chapter DOI: https://doi.org/10.1017/9781108696913.007
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  • Platform Pricing
  • Paul Belleflamme, Université Catholique de Louvain, Belgium, Martin Peitz, Universität Mannheim, Germany
  • Book: The Economics of Platforms
  • Online publication: 05 October 2021
  • Chapter DOI: https://doi.org/10.1017/9781108696913.007
Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • Platform Pricing
  • Paul Belleflamme, Université Catholique de Louvain, Belgium, Martin Peitz, Universität Mannheim, Germany
  • Book: The Economics of Platforms
  • Online publication: 05 October 2021
  • Chapter DOI: https://doi.org/10.1017/9781108696913.007
Available formats
×