Superstars in Two-Sided Markets : Exclusives or Not?

This article studies incentives for a premium provider (Superstar) to offer exclusive contracts to competing platforms mediating the interactions between consumers and firms. When platform competition is intense, more consumers affiliate with the platform favored by Superstar's exclusive deal. This mechanism is self-reinforcing as more firms follow consumer decisions and some single home on the favored platform. Our model shows that the presence of indirect network externalities may overturn the common conclusion in the one-sided literature that exclusivity could be deemed as anti-competitive. Exclusivity can be welfare-enhancing and a vertical merger (platform-Superstar) may make non-exclusivity more likely than if the Superstar was independent