Three Essays in Industrial Organization

This dissertation includes two papers about issues in two-sided markets and one paper discussing hierarchical Stackelberg model. Chapter 1 analyzes endogenous horizontal product differentiation in a two-sided market with two platforms based on a two-stage Hotelling model. When the two sides are both single-homing, the platforms will choose maximal product differentiation in the equilibrium. However, when one side is multi-homing, and the multi-homing side views the platforms indifferent, the platforms choose minimal product differentiation in the equilibrium. Chapter 2 investigates horizontal mergers in a two-sided market between three horizontally differentiated platforms. This chapter provides a theoretical analysis of impacts on price and welfare based on merger cost savings and cross-group externalities. The existence of the cross-group externalities weakens the role of the strong cost savings playing in the price decline after the merger. Consumer welfare may increase even when the prices of the merged platform increase. If the platforms have different costs, a merger between the less efficient platforms can lead to higher consumer surplus than a merger between the more efficient platforms. However, the latter generates higher social welfare. Chapter 3 investigates the equilibrium of a hierarchical Stackelberg oligopoly model that firms choose output sequentially with possibly heterogeneous firms. This chapter also incorporates the comparisons of the equilibrium outcomes between the hierarchical Stackelberg model and the standard Cournot model. The results demonstrate that the equilibrium prices in the hierarchical Stackelberg model with heterogeneous firms are lower regardless of entry sequences. The total welfare loss relative to the optimal social situation with the most efficient entry sequence in the hierarchical Stackelberg model is lower than that in the Cournot model