Taxation scheme planning in multi-sided platforms, a case of application platform

Document Type : Research Paper


1 School of Industrial Engineering, College of Engineering, University of Tehran, Tehran, Iran

2 Kingston Business School, Kingston University, Kingston Hill, Kingston Upon Thames, United Kingdom

3 School of Industrial Engineering, K. N. Toosi University of Technology (KNTU), Tehran, Iran


Digital transformation plays an increasingly important role in shaping the current business landscape and contributing to economic development. Using digital platforms and various technologies, companies can compete on a global scale with the help of digitization and industry 4.0 technologies. Global firms are benefiting from the rise of the digital economy. Facebook, Alibaba, and Uber compete in a new multi-sided platform world. Businesses such as media companies, banks, and software companies are among the many multi-sided platform firms that serve distinct groups of customers connected by interdependent demand. In this study, we analyze price-setting behavior in a multi-sided platform. As a well-known result of tax incidence by this article, consumers of more heavily taxed goods pay a higher price and buy fewer goods. A multi-sided market does not necessarily hold this result based on our findings. A higher ad valorem tax may actually lower end-user prices and boost sales. Due to this fact, multi-sided platforms may not engage in tax shifting by raising prices. The analysis is followed by a real-life case study of a diet application. The results and discussion are then presented for the proposed real-life case study.


Main Subjects

Abdelkafi, N., Raasch, C., Roth, A., & Srinivasan, R. (2019). Multi-sided platforms. In: Springer.
Alipour-Vaezi, M., Tavakkoli-Moghaddam, R., & Mohammadnazari, Z. (2022). Optimization of a television advertisement scheduling problem by multi-criteria decision making and dispatching rules. Multimedia Tools and Applications, 81(8), 11755-11772.
Behdinian, A., Amani, M. A., Aghsami, A., & Jolai, F. (2022). An integrating Machine learning algorithm and simulation method for improving Software Project Management: A real case study. Journal of Quality Engineering and Production Optimization.
Belleflamme, P., & Toulemonde, E. (2018). Tax incidence on competing two‐sided platforms. Journal of Public Economic Theory, 20(1), 9-21.
Benzell, S. G., & Collis, A. (2019). Multi-Sided Platform Strategy, Taxation, and Regulation: A Quantitative Model and Application to Facebook.
Bloch, F., & Demange, G. (2018). Taxation and privacy protection on Internet platforms. Journal of Public Economic Theory, 20(1), 52-66.
Bourreau, M., Caillaud, B., & De Nijs, R. (2018). Taxation of a digital monopoly platform. Journal of Public Economic Theory, 20(1), 40-51.
Evans, D., & Schmalensee, R. (2005). The industrial organization of markets with two-sided platforms. In: National Bureau of Economic Research Cambridge, Mass., USA.
Evans, D. S. (2003). Some empirical aspects of multi-sided platform industries. Review of Network Economics, 2(3).
Evans, D. S., & Noel, M. D. (2008). The analysis of mergers that involve multisided platform businesses. Journal of Competition Law and Economics, 4(3), 663-695.
Evans, D. S., Schmalensee, R., Noel, M. D., Chang, H. H., & Garcia-Swartz, D. D. (2011). Platform economics: Essays on multi-sided businesses. Platform Economics: Essays on Multi-Sided Businesses, David S. Evans, Ed., Competition Policy International.
Filistrucchi, L. (2008). A SSNIP test for two-sided markets: the case of media. Available at SSRN 1287442.
Filistrucchi, L., Geradin, D., Damme, E. v., Keunen, S., Wileur, J., Klein, T. J., & Michielsen, T. O. (2010). Mergers in two-sided markets-A report to the NMa.
Golovianko, M., Gryshko, S., Terziyan, V., & Tuunanen, T. (2022). Responsible cognitive digital clones as decision-makers: a design science research study. European Journal of Information Systems, 1-23.
Kind, H. J., & Koethenbuerger, M. (2018). Taxation in digital media markets. Journal of Public Economic Theory, 20(1), 22-39.
Kind, H. J., Koethenbuerger, M., & Schjelderup, G. (2006). Taxation in Two-Sided Markets.
Kind, H. J., Koethenbuerger, M., & Schjelderup, G. (2008). Efficiency enhancing taxation in two-sided markets. Journal of Public Economics, 92(5-6), 1531-1539.
Kind, H. J., Koethenbuerger, M., & Schjelderup, G. (2009). On revenue and welfare dominance of ad valorem taxes in two-sided markets. Economics Letters, 104(2), 86-88.
Kind, H. J., Koethenbuerger, M., & Schjelderup, G. (2010). Tax responses in platform industries. Oxford Economic Papers, 62(4), 764-783.
Kind, H. J., Schjelderup, G., & Stähler, F. (2013). Newspaper differentiation and investments in journalism: The role of tax policy. Economica, 80(317), 131-148.
Kotsogiannis, C., & Serfes, K. (2010). Public goods and tax competition in a two‐sided market. Journal of Public Economic Theory, 12, 281-321(2).
Lin, X., & Wang, X. (2022). Towards a model of social commerce: improving the effectiveness of e-commerce through leveraging social media tools based on consumers’ dual roles. European Journal of Information Systems, 1-18.
Mamoudan, M. M., Mohammadnazari, Z., Ostadi, A., & Esfahbodi, A. (2022). Food products pricing theory with application of machine learning and game theory approach. International Journal of Production Research, 1-21.
Rochet, J.-C., & Tirole, J. (2003). Platform competition in two-sided markets. Journal of the european economic association, 1(4), 990-1029.
Rysman, M. (2009). The economics of two-sided markets. Journal of economic perspectives, 23(3), 125-143.
Sanchez‐Cartas, J. M., & León, G. (2021). Multisided Platforms and Markets: A Survey of the Theoretical Literature. Journal of Economic Surveys, 35(2), 452-487.
Täuscher, K., & Abdelkafi, N. (2018). Scalability and robustness of business models for sustainability: A simulation experiment. Journal of Cleaner Production, 170, 654-664.
Trabucchi, D., Muzellec, L., Ronteau, S., & Buganza, T. (2021). The platforms’ DNA: drivers of value creation in digital two-sided platforms. Technology Analysis & Strategic Management, 1-14.
Zhao, Y., Von Delft, S., Morgan-Thomas, A., & Buck, T. (2020). The evolution of platform business models: Exploring competitive battles in the world of platforms. Long Range Planning, 53(4), 101892.
Zhu, F., & Iansiti, M. (2012). Entry into platform‐based markets. Strategic Management Journal, 33(1), 88-106.