Applied mathematics

Pricing strategies in two-sided network markets with different types of agents

E. N. Konovalchikova

Karelian Research Center of the Russian Academy of Sciences, 11, Pushkinskaya ul., Petrozavodsk, 185910, Russian Federation

Abstract: The article examines pricing strategies in a two-sided network platform market with cross-network effects for users belonging to different groups. Agents of the opposed groups are assumed to be uniformly distributed over the plane of a square, and the platforms are located symmetrically. Agents of both groups choose a platform guided by their utility functions given by the Hotelling specification with a Manhattan metric. The payoff of each platform depends on the number of agents from both groups on the platform, the visiting fee, and the user service costs. The cases of uniform and discriminatory pricing are considered under the condition that agents in one of the groups can be both single-homing and multi-homing. We find the equilibrium pricing strategies and demonstrate that where agents of both groups are single-home, the total social welfare does not depend on the pricing model.

Keywords: price discrimination, two-sided markets, platforms, network effects.

UDC: 519.83

MSC: 91A10

Received: June 4, 2024
Accepted: March 13, 2025

DOI: 10.21638/spbu10.2025.204