We provide an alternative analysis of competition strategies that focuses on the vertical differentiation strategies and pricing strategies of two-sided platforms. Compared with horizontal differentiation model mostly used in the current literature of this field, we show that due to cross-group externalities, the platforms tend to reduce difference between the degrees of their quality and engage in price competition to compete for market share fiercely. Our results contrast with the traditional competition theory and give some insight on competition strategy and industry policy.
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