The Digital Market Competition with Multisided Markets: A Study into the Major Online Platforms in India

The uniqueness of digital market is the prevalence of (1) network effects, (2) high sunk costs and low marginal costs and (3) multisided markets, which makes high entry barriers to the new players to successfully enter into the market. This study examined the extent of market concentration and multisidedness in three important digital market segments, that is, (1) e-commerce, (2) taxi aggregators and (3) payment gateways. High level of market concentration is found in these three important digital market segments, and a strong presence of multisided market for the top companies in these segments is noticed. Advertising and marketing have been a major source of income for these companies, apart from the main business, which enables them to cross-subsidize the products traded in the main market and thereby pose extreme competitive constraints to their competitors. Lower prices for the main products may be a short-run phenomenon to capture the market. After capturing the market, the firm has the choice to continue with the lower price or not, as the substitutability is less now. This is important, especially in cases where platforms own their own products/services and compete with other sellers on the same platform. Furthermore, the study observed the presence of Related Party Services, particularly in the-commerce platforms, which needs to be examined further. Whether this creates unfavourable conditions for the other sellers needs further examination as well. In short, this study points to the need to examine the implications of the presence of multisided markets in pricing decisions, and to see whether it is adversely affecting various stakeholders within the digital market segments and the unorganized offline markets.

JEL Classification: L1; L5; O3, L4