The Role of Sustainable Management for Two-sided Platform Competition

Abstract

This study develops a theoretical framework to analyze investment for corporate social responsibility (CSR) activities in competing two-sided platforms. Building on previous research, we model two platfors, a platform with CSR and without CSR, where consumers and providers choose platforms based on utilities that network externalities, valuation for CSR, and regulatory costs. Agent personality is captured by assuming CSR valuations and regulation loss sensitivities follow uniform distributions. We derive closed form equilibrium numbers of consumers and providers and equilibrium prices under quadratic CSR costs and probabilistic violation losses. Numerical analysis with calibrated parameters from prior literature shows that higher CSR investment raises expected profits, participant numbers of consumers, and equilibrium prices for both platforms, platform with CSR consistently outperforming its without CSR counterpart. The results demonstrate that CSR investment as a sustainable management functions both as a strategic tool for customer acquisition leveraging enhanced network externalities and as an effective risk management mechanism by reducing expected violation losses. Moderate CSR investment thus yields competitive advantages, suggesting platform managers should integrate CSR considerations into early design and pricing strategies. The model also highlights trade offs between investment costs and network benefits, providing a basis for optimizing CSR levels under varying market conditions. Future work will empirically calibrate key parameters to validate and refine these theoretical insights.