Competition in Multi-sided Markets: Divide and Conquer
AbstractThis paper studies Stackelberg price competition in a multi-sided market. The second-mover can engage in divide-and-conquer strategies, which involve cross-subsidies between sides. The paper recovers bounds on profits, and refines the results with a selection criteria whereby consumers resolve coordination failure in favor of a focal platform. It then analyzes perfect price discrimination with network effects, and two-sided market, shedding light on inefficiencies and strategic choices by platforms. A leading platform may refrain from selling to some side in order to soften competition, it tends to favor excessively balanced market shares and may prefer compatibility to reduce price competition. (JEL D43, D85)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Microeconomics.
Volume (Year): 3 (2011)
Issue (Month): 4 (November)
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
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- Jullien, Bruno & Pouyet, Jérôme & Sand-Zantman, Wilfried, 2013.
"Divide and Learn: Early Contracting with Endogenous Threat,"
TSE Working Papers
13-415, Toulouse School of Economics (TSE).
- Jullien, Bruno & Pouyet, Jérôme & Sand-Zantman, Wilfried, 2013. "Divide and Learn: Early Contracting with Endogenous Threat," IDEI Working Papers 783, Institut d'Économie Industrielle (IDEI), Toulouse.
- Renato Gomes & Alessandro Pavan, 2013. "Cross-Subsidization and Matching Design," Discussion Papers 1559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Hanna Halaburda & Bruno Jullien & Yaron Yehezkel, 2013. "Dynamic Network Competition," Working Papers 13-10, NET Institute.
- Emilio Calvano & Bruno Jullien, 2011. "Issues in on-line advertising and competition policy: a two-sided market perspective," Working Papers 427, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Rossella Argenziano, 2007.
"Differentiated Networks: Equilibrium and Efficiency,"
Economics Discussion Papers
638, University of Essex, Department of Economics.
- Rossella Argenziano, 2008. "Differentiated networks: equilibrium and efficiency," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 747-769.
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