The Competitive Strategy of Large Retailer in Two-sided Markets

This paper focuses on the competitive strategy of large retailer as a platform provider in two-sided markets. We found that the large retailer would attract lots of consumers to take the advantage of the cross-group network externalities in the beginning. To maximize the profit, the large retailer would offer low price to the consumers with larger cross-group network externalities, and high price to the suppliers with lower cross-group network externalities. The slotting fees and higher retail price charged by the large retailer would partly compensate the cost and redistribute the externalities in the market.