Move Order in Hotelling Models of Platform Markets∗
semanticscholar(2020)
Abstract
We study a Hotelling framework in which customers pay a platform to enter a market in which they make a purchase from one of two competing sellers on opposite ends of a Hotelling line. We solve for a full-coverage equilibrium outcome when either the platform or the sellers have the first move. Whereas the outcome in a game where sellers move first can resemble that in the canonical game with no platform, when the platform moves first, the unique outcome is a limiting case of the outcome under partial coverage in which the platform uses its first mover advantage to reduce competing sellers’ equilibrium prices.
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