Competitive Advantage of Sellers in Multi-Sided Markets

It is a well-documented phenomenon that multi-sided markets can lead to bottleneck situations or platform monopolies that leave sellers without economic surplus yet we know little about strategies that platform sellers can employ if they are constrained to participate in such a market. Therefore we ask: Which strategic options allow incumbent sellers to achieve a competitive advantage in a multi-sided market, despite an unfavorable market structure? We find that multi-sidedness impacts the effectiveness of strategic options because their use can induce competitive pressures and decrease externalities. We contribute to the literature in platform economics and multi-sided markets by introducing sellers’ heterogeneity that can lead to sustained competitive advantage. We show complex linkages exist between market structure and firm-specific advantages, a promising area of future research.