Two-Sidedness, Product Complementarity and the Platform-Specific Nature of Externalities: A Comment on Filistrucchi

Posted by Social Science Research Network

Two-Sidedness, Product Complementarity and the Platform-Specific Nature of Externalities: A Comment on Filistrucchi

By Adriaan Ten Kate

In his article “Two-Sided Vs. Complementary Products” Filistrucchi explains in what respect two-sided platforms are different from firms producing complementary products, in spite of the similarity in pricing strategies. For him, the distinguishing feature of two-sided platforms is the existence of two distinct customer groups and externalities between those groups that remain uncompensated. Pricing practices by two-sided platforms internalize such externalities. In my view, it is not so much the internalization of externalities that explains pricing practices, but rather the platform-specific nature of the externalities – that is, that more customers on one side of a platform only benefit customers on the other side of the same platform, not those on the other side of other platforms. I believe that there is no essential difference with firms producing firm-specific complements. In this article I try to explain why.

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