Abstract: This paper investigates whether a manufacturer of internally competing products would platformize itself, how the platformization-based internal competition is coordinated, and what effect will be generated on social welfare. Firstly, the competition model of horizontal differentiation within a manufacturer and the principal-agent model with platform as the principal and producer as the agent are constructed based on the internal competition situation. Then, by solving and comparing the equilibrium profits of platformized and non-platformized production, and constructing a social welfare function, we draw the following conclusions: the lower fixed unit cost a manufacturer spends on diversifying its products, the more inclined it is to platformize itself, but the platformization leads to increased internal competition to the detriment of social welfare due to the price pass-through effect of production agents; by adjusting the price structure to weaken the price pass-through effect of production agents, platformized manufacturers can not only enhance their own incentives for platformization, but also achieve Pareto improvements at the social level.

Key words: internal competition, platformization, coordination, social welfare