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Business expansion strategy of two-sided platform considering technology R & D effect and congestion effect

Junxia Yuan (School of Business, Shanghai Dianji University, Shanghai, China)
Renhuai Liu (School of Management, Hangzhou Dianzi University, Hangzhou, China)
Yuanyang Zou (Business School of HBUE, Hubei University of Economics, Wuhan, China)

Kybernetes

ISSN: 0368-492X

Article publication date: 26 June 2024

101

Abstract

Purpose

A new model for two-sided platforms is presented, incorporating both the original business and an expanded (new) business. Previous studies have neglected the impact of technology R & D on the new business aspect of two-sided platforms. This study addresses this gap by examining the technology R & D effect on the new business while also considering the congestion effect on the original business. It investigates the optimal pricing and user scales for both the original and new businesses. Additionally, the profits of the original business, the new business, and the overall two-sided platform are analyzed.

Design/methodology/approach

Previous studies have overlooked the technology R & D effect on the new business aspect of two-sided platforms. Therefore, this study focuses on examining the technology R & D effect on the new business. Additionally, the congestion effect on the original business is considered. To determine the optimal prices for both sides of the original and new businesses, a game sequence model is introduced.

Findings

The optimal price on the service buyers (defined b side) of new business increases only with regard to technology R & D effect on b side of new business increasing. The optimal price on b side of new business is equal to half of the b-side R & D effect. The optimal profit of original business decreases with regard to the technology R & D effect of new business and cross-market network effect on the services provider (defined s side) between original business and new business increasing, respectively. To gain optimal profit of two-sided platform, the two-sided platform adopts some strategies to improve the congestion.

Originality/value

A new two-sided platform model is stated, in which the technology R & D effect is embraced. The expanded business scenario of two-sided platform is considered, that is, the two-sided platform has one business firstly and a new business is developed or improved of two-sided platform. To solve the prices strategy of original business and new business, a game sequence of the original business and new business is presented.

Keywords

Acknowledgements

The authors are grateful to three anonymous referees for their helpful comments and suggestions, which have led to much improvement of the paper.

Citation

Yuan, J., Liu, R. and Zou, Y. (2024), "Business expansion strategy of two-sided platform considering technology R & D effect and congestion effect", Kybernetes, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/K-11-2023-2259

Publisher

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Emerald Publishing Limited

Copyright © 2024, Emerald Publishing Limited

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