First-Party Content, Commitment and Coordination in Two-Sided Markets

We study the effect of two-sided platforms ’ ability to invest in first-party content on their optimal pricing strategies. If first-party content and third-party seller participation are com-plements (substitutes) then: i) a monopoly platform facing favorable expectations invests more (less) in first-party content than a platform facing unfavorable expectations; ii) the platform facing unfavorable expectations is more likely to subsidize sellers (buyers) when its investment in first-party content is higher. These results hold with both simultaneous and sequential entry of the the two sides. With two competing platforms- an incumbent facing favorable expectations and an entrant facing unfavorable expectations- and singlehoming on one side of the market, the incumbent always invests (weakly) more in first-party content relative to the case in which it is a monop-olist