Common Network Externalities Shift Profits Between Platforms and Consumers
Competition in two-sided markets with common network externalities can affect how platforms make profits and set prices. When both groups benefit from changes in size, platforms can shift rents between consumers and providers. If the common network externality is homogeneous of degree zero, platform profits do not depend on the intensity of the externality. This is different from traditional beliefs that network externalities increase competition in positive cases and decrease it in negative cases.