Thesis

Essays on digital platforms : network effects, market structure, and platform strategy

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Awarding institution
  • University of Strathclyde
Date of award
  • 2026
Thesis identifier
  • T18004
Person Identifier (Local)
  • 202170882
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Abstract
  • This thesis investigates the economic functioning of digital platform markets, highlighting how their unique characteristics challenge industrial organisation (IO) theory applied to traditional markets. Using a theoretical IO framework, it develops models to analyse platform strategies, competition, and user surplus, providing insights relevant for both economic research and policy design. Chapter 1: The Economics of Digital Markets The first chapter aims to develop a unified theoretical framework that brings together diverse strands of research on two-sided markets and advertising. By doing so, it organises the existing literature in a systematic and rigorous way, providing a clearer understanding of the distinctive features of digital markets, such as multisided interactions, network effects, and monetisation strategies, and their implications for economic policy. The key contribution of this chapter lies in integrating fragmented theoretical approaches into a unified and flexible framework that can be applied across different types of digital platforms and market structures, enabling analysis of competitive interactions, user switching behaviour, and mergers. Thus, it provides a consistent analytical framework for comparing price-based and advertisement (ad)-supported platforms, analysing platform strategies, policy interventions, and welfare outcomes, and capturing emerging trends such as multi-homing, platform consolidation, and evolving monetisation models. Chapter 2: Competition and Mergers among Digital Platforms Building on the framework developed by Tan and Zhou (2021) in The Effects of Competition and Entry in Multi-sided Markets published in the REStud paper, this chapter develops a theoretical model to examine how competition and market consolidation of digital platforms affect user surplus. The model accounts for both symmetric and asymmetric platforms and examines transitions from triopoly to duopoly and from duopoly to monopoly. Through analytical reasoning, illustrated with MATLAB-based numerical simulations, the chapter identifies conditions under which reducing the number of platforms from three to two can enhance user surplus while showing that consolidation to a monopoly generally reduces user surplus due to higher prices. This chapter contributes by examining how network effects and platform asymmetry drive changes in user surplus and, in turn, shape our understanding of the welfare impact of platform mergers. It identifies the conditions under which platform mergers can improve or reduce welfare, offering guidance for regulators on assessing consolidation, and emphasising the importance of maintaining competitive market structures. Chapter 3: Advertising Spending and User Welfare in Digital Platform Markets This chapter examines advertising spending on ad-based platforms and its impact on user surplus across different scenarios, including multi-homing, single-homing, duopoly, and post-merger monopoly settings. A model of an ad-based monopoly platform illustrates how advertising expenditure is determined, highlighting trade-offs between platform revenue and user surplus. The analysis shows that multi-homing does not always enhance welfare, particularly when platforms are highly substitutable, and ad exposure is high. In contrast to price-based markets, mergers between highly substitutable ad platforms can increase user surplus by reducing duplicate content and cumulative ad nuisance. These findings provide a structural understanding of digital advertising markets and offer detailed policy guidance on platform regulation, advertising standards, and merger assessment. Overall, this thesis advances the understanding of digital platform markets by developing a unified theoretical framework applicable across different monetisation models, analysing the interplay between network effects, competition, and mergers, and clarifying the welfare implications of multi-homing and advertising. Its contributions inform both economic theory and regulatory policy, offering tools to assess platform strategies, market structure, and user welfare in evolving digital markets.
Advisor / supervisor
  • Dickson, Alex, 1979-
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