Abstract: In recent years, competition between platforms has created a new pattern of competition. This kind of competition is quite different from the competition model of traditional industrial organization. On one hand, the platform may attract a large number of consumers at low or even free price. On the other hand, they can seek profits from advertisers and suppliers. In reality, there are many cases of conflicts between platforms and suppliers, such as disputes between CAINIAO and SF EXPRESS. This phenomenon is studied and makes a reasonable economic explanation is given for this phenomenon. The welfare effects of exclusive agreements are also studied and theoretical basis for China's anti-monopoly law enforcement in related fields is provided.
In the basic model, a game model based on Hotelling model is developed. It is supposed that there are two symmetric platforms located at either end of Hotelling line. Platforms are viewed as homogenous by sellers but heterogeneous by buyers. In the equilibrium, it is shown that "competitive bottlenecks" arise endogenously, which means that platforms do not compete directly for sellers, instead choosing to compete indirectly by subsidizing buyers to join. Sellers are left with none of the gains from trade.
In the extension section, it is found that platform has incentive to sign an exclusive contract with all sellers. In the equilibrium, it is shown that although the rival platform is foreclosed from one side of the market, it still has some demand from agents on the other side. It is shown that welfare effects of exclusive agreements are uncertain. When the marginal cost of the platform and the parameters of cross externalities are larger, the signing of exclusive agreements can enhance social welfare.
This paper has several contributions. First, it is shown the mechanism of issue between platforms and suppliers. The agents who have incentive to multi-home will be always extracted all surplus by platforms. Second, the welfare analysis shows that if platform use exclusive contract to lock all suppliers, the consumer surplus and social welfare may become higher or lower. The welfare effect is not certain. So the government should pay careful attention to the welfare effects of exclusive contract at such a market.

Key words: two-sided market, platform competition, exclusive dealing contract, competitive bottlenecks