Channel Management for Digital Products in the Two-sided Market with Network Externality Effects
Channel selection is a critical trade-off for digital products firms whose products are characterized by network externality. This work develops the models of consumers’ utility impacted by the network externality for two channel strategies of the digital product firms in the two-sided market: direc...
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2023-01-01
|
| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2023/3461050 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1850212340480344064 |
|---|---|
| author | Wei Li Yan-Peng He Shu-Gang Ma |
| author_facet | Wei Li Yan-Peng He Shu-Gang Ma |
| author_sort | Wei Li |
| collection | DOAJ |
| description | Channel selection is a critical trade-off for digital products firms whose products are characterized by network externality. This work develops the models of consumers’ utility impacted by the network externality for two channel strategies of the digital product firms in the two-sided market: direct channel strategy and platform channel strategy. Deriving from the consumers’ utility, the optimization models of the two channel strategies are presented. The optimization models are solved through the Lagrangian method, and the comparative statics analysis is conducted to investigate the effect of network externality on optimality. Mathematical results show that if the intensity of network externality in the online platform surpasses that in the direct channel, the platform channel strategy dominates the other channel strategy; otherwise, the direct channel strategy is the firms’ optimal decision. In addition, the two channels share the equal optimal price, and the firms’ profit (and demand) would be positively impacted by the network effect and the products’ features but negatively impacted by the consumers’ learning cost. This work provides decision support for the digital product firms on channel selection in the context of the two-sided market. |
| format | Article |
| id | doaj-art-8f0c528cb4654f7595dbcfb0cd0e8e4d |
| institution | OA Journals |
| issn | 1607-887X |
| language | English |
| publishDate | 2023-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-8f0c528cb4654f7595dbcfb0cd0e8e4d2025-08-20T02:09:22ZengWileyDiscrete Dynamics in Nature and Society1607-887X2023-01-01202310.1155/2023/3461050Channel Management for Digital Products in the Two-sided Market with Network Externality EffectsWei Li0Yan-Peng He1Shu-Gang Ma2Research Center for Contemporary Commercial ServicesResearch Center for Contemporary Commercial ServicesResearch Center for Contemporary Commercial ServicesChannel selection is a critical trade-off for digital products firms whose products are characterized by network externality. This work develops the models of consumers’ utility impacted by the network externality for two channel strategies of the digital product firms in the two-sided market: direct channel strategy and platform channel strategy. Deriving from the consumers’ utility, the optimization models of the two channel strategies are presented. The optimization models are solved through the Lagrangian method, and the comparative statics analysis is conducted to investigate the effect of network externality on optimality. Mathematical results show that if the intensity of network externality in the online platform surpasses that in the direct channel, the platform channel strategy dominates the other channel strategy; otherwise, the direct channel strategy is the firms’ optimal decision. In addition, the two channels share the equal optimal price, and the firms’ profit (and demand) would be positively impacted by the network effect and the products’ features but negatively impacted by the consumers’ learning cost. This work provides decision support for the digital product firms on channel selection in the context of the two-sided market.http://dx.doi.org/10.1155/2023/3461050 |
| spellingShingle | Wei Li Yan-Peng He Shu-Gang Ma Channel Management for Digital Products in the Two-sided Market with Network Externality Effects Discrete Dynamics in Nature and Society |
| title | Channel Management for Digital Products in the Two-sided Market with Network Externality Effects |
| title_full | Channel Management for Digital Products in the Two-sided Market with Network Externality Effects |
| title_fullStr | Channel Management for Digital Products in the Two-sided Market with Network Externality Effects |
| title_full_unstemmed | Channel Management for Digital Products in the Two-sided Market with Network Externality Effects |
| title_short | Channel Management for Digital Products in the Two-sided Market with Network Externality Effects |
| title_sort | channel management for digital products in the two sided market with network externality effects |
| url | http://dx.doi.org/10.1155/2023/3461050 |
| work_keys_str_mv | AT weili channelmanagementfordigitalproductsinthetwosidedmarketwithnetworkexternalityeffects AT yanpenghe channelmanagementfordigitalproductsinthetwosidedmarketwithnetworkexternalityeffects AT shugangma channelmanagementfordigitalproductsinthetwosidedmarketwithnetworkexternalityeffects |