Platform Upgrade and Pricing Strategies in the Multi-Sided Market Considering Cross-Network Externality

Platforms facilitate transactions between service providers, consumers, and advertisers by providing information, and matching supply and demand. Taking into account the platform's cross-network externalities, we developed two three-stage game-theoretic pricing models under single and dual rollover strategies. Our study aims to determine the best upgrade and pricing strategies, as well as identify how platform quality and cross-network externalities affect the platform's equilibrium decisions. The results show that a dual rollover strategy is preferable to capture a larger market share than a single rollover strategy. Furthermore, cross-network externalities among consumers, merchants, and advertisers are shown to significantly affect platform profits. When determining the optimal price for an upgrade, the platform should consider the cross-network externality and improve the quality of the upgraded platform to maximize its profits