Compatibility And Multi-homing In Two-sided Networks: The Experiential Evidence From Chinese Payment Network

In two-sided networks, an increasing number of end-users affiliate to competing platforms to get greater network benefits although their products are compatible. This phenomenon has not been interpreted in network effects. We set up a model with indirect network effects in two-sided networks, and analyze the compatibility and multi-homing using hotelling model. And found that because of all compatibility of platforms is incomplete, there are many end-users multi-homing even platforms compatible. Finally we analyzed the case of payment card network in China and acquired some empirical evidence for our consequence.