Network Goods, Price Discrimination, and Two-sided Platforms

Network Goods, Price Discrimination, and Two-sided Platforms

By:

Paul Belleflamme; Martin Peitz

Abstract:

A monopolist selling a network good to heterogeneous users is shown to become a twosided platform if it can condition prices on some user characteristics or if it cannot but induces user self-selection by offering screening contracts. This shows that the availability of sophisticated pricing instruments is essential to make a platform two-sided, not the ability to distinguish separate user groups. The use of freemium strategies (which consists of offering a base version at zero price and a premium version at a positive price) emerges as a special case of versioning.