A two-sided market model of optimal price structure for instant messenger

Xu, Jun (2013): A two-sided market model of optimal price structure for instant messenger. Published in: Journal of Applied Mathematics , Vol. 2013, (2013)

Abstract

Instant messenger (IM) is one of the most popular Internet applications all over the world.This paper examines the pricing problem of IM based on two-sided market model. IM serves as a two-sided platform, which gets both Internet users and advertisers on board. This paper concludes that IM operator adopts a heavily skewed price structure that favors IM users both under monopolistic case and under horizontal differentiated duopolistic case.When advertising revenue is large enough relatively to marginal cost for serving IM users, IM users can enjoy free service provided by IM operators.The competitive equilibrium of duopolistic case is not necessarily symmetric when advertisers choose singlehoming. Even in the symmetric equilibrium platform would rather deter all advertisers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Instant messenger; price structure; two-sided market
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms

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