Research on Platform Operation Strategy Considering Consumers’ Hassle Costs

Abstract

Based on consumers’ different preferences for hassle costs, we study two platform operation strategies: selected platforms and diversified platforms. Considering diverse charging systems of merchants on the platform, a two-sided user utility function and profit function are established to examine the influence of hassle costs, platform services and the strength of two-sided network effects on the scale of platform users, and platforms’ profits and price. The results show that: (1) The selected platform strategy adopting the transaction fee system is better than other strategies. (2) Under the selected platform strategy, the scale of bilateral users and platform profits will decrease with the increase in hassle costs, and increase with the strengthening of the bilateral network effects. However, the proportion of equilibrium pricing for merchants will increase with the increase in consumer hassle costs, and will decrease with the increase in the network effect on the consumer side. (3) The less value-added services that selected platforms provide to consumers, the more value-added services exist to merchants and the higher the equilibrium pricing is for merchants. However, as the network effect on the side of merchants is increasing, the equilibrium pricing ratio of the platform to merchants shows three trends However, the general trend is that the greater the network effect of the business side, the lower the fee ratio and the higher the platform profit.