Pricing strategy of the platform considering network effects and business expansion

Considering the cross-market network effect and characteristics of two-sided platforms, this paper builds the sequential game model to study the pricing strategy of a monopoly platform with business expansion. The research shows that: The pricing strategy of the platform is influenced by user base, crossgroup network externality and cross-market network effect. There is no charge on the side of the new business with cross-market network effect and the membership fee is always charged on the new side. Whether to charge membership fees or to subsidy users on both sides of the original business depends on the relationship of the cross-group network externality and cross-market network effect. In addition, the profit of original business decreases with the increasing of the cross-market network effect while the profit of the new business increases with the increasing of the cross-market network effect. The user base of the platform’s original business is always conducive to the increase of total profit and new business’s profit, while the influence of the user base on the original business profit is also dependent on the relationship between cross-network externalities and cross-market network effect. © 2020, Editorial Board of Journal of Systems Engineering Society of China. All right reserved.