Multihoming and Oligopolistic Platform Competition

Abstract

We provide a general framework to analyze competition between two-sided platforms, in which buyers and sellers can multihome, and platforms compete on transaction fees charged on both sides. The framework allows buyers and sellers to have heterogenous benets from using platforms for transactions, and additionally, buyers to have idiosyncratic preferences over using the dierent platforms. We study how key primitives such as the number of platforms, the fraction of buyers that nd multihoming costly, the value of transactions for buyers and sellers, the degree of buyer heterogeneity, and the possibility of competition between sellers determine the level and structure of platform fees.