Influence of Compatibility on Pricing Strategy of Firms with Two-Sided Markets

Pricing strategy is a significant decision for firms with two-sided markets. This paper mainly focuses on the influence of compatibility on these firms' pricing strategy. Under the assumption of homogeneous and heterogeneous consumers, we get different conclusions. In homogeneous consumer model, we find that the price of any side market is determined by its own compatibility degree. While in heterogeneous consumer model, the price of any side market is determined by the other side market's compatibility degree, not by its own. What's more, compatibility enhances the market power of firms in homogeneous consumer model, but it intensifies the price competition of firms in heterogeneous model.