Pricing and Subsidy Strategies: The Impacts of Providers' Ability Gap on Competing Knowledge Payment Platforms

Abstract

The growth of the knowledge payment market is driven by the emergence of knowledge payment platforms that match providers looking to achieve cognitive surplus through knowledge sharing with consumers looking to acquire high-quality knowledge quickly. Like many digital platforms, expanding consumer market to generate revenue has been a challenge for knowledge payment platforms as well and subsidy strategy is seen as the most important way for the same. In this paper, we focus on the pricing and subsidy strategies of two knowledge payment platforms with providers of different ability to balance the revenue from consumers and subsidies to providers. Specifically, we introduce a duopoly competition model and characterize the technical service fees and subsidies in this model. Further, we respectively analyze the impacts of providers' ability gap on two competing platforms' pricing and subsidy strategies, market shares, as well as profits. We find that as providers' ability gap increases, the platform with high-ability providers adopts strategies of increasing technical service fees and subsidies, while the platform with low-ability providers has to adopt strategies of decreasing technical service fees and subsidies. In addition, compared with low-quality platform, the platform with high-ability providers can occupy a larger share in consumer market. However, influenced by multiple factors, the provider market is relatively complex and the presence of high-quality platform cannot always ensure a larger share of it. Finally, we also find that as the difference in providers' ability of two competing platforms increases, the profit gap between these platforms also widens.