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Sufficient Decisions in Multi†Sided and Multiproduct Markets

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  • Alexei Alexandrov
  • Daniel F. Spulber

Abstract

We show that in many models where firms make multiple decisions, analysis can be made more tractable by re†formulating the model into one in which each firm makes a single choice, which we call a sufficient decision. The transformation allows application of standard techniques in these settings, including pass†through for tax incidence and upward pricing pressure for merger analysis. The transformation works because the assumption of profit maximization links the firms’ decisions together. Examples include models of monopoly and oligopoly in two†sided markets, where a natural sufficient decision may be the number of transactions that the firm facilitates, and multiproduct markets.

Suggested Citation

  • Alexei Alexandrov & Daniel F. Spulber, 2017. "Sufficient Decisions in Multi†Sided and Multiproduct Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 65(4), pages 739-766, December.
    • Handle: RePEc:bla:jindec:v:65:y:2017:i:4:p:739-766
    DOI: 10.1111/joie.12159
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    Cited by:

    1. Galloway, Tracey & Li, Nicholas, 2023. "Pass-through of subsidies to prices under limited competition: Evidence from Canada’s Nutrition North program," Journal of Public Economics, Elsevier, vol. 225(C).
    2. Cosnita-Langlais, Andreea & Johansen, Bjørn Olav & Sørgard, Lars, 2021. "Upward pricing pressure in two-sided markets: Incorporating rebalancing effects," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    3. Daniel F. Spulber, 2019. "The economics of markets and platforms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 159-172, January.
    4. Michael L. Katz, 2019. "Platform economics and antitrust enforcement: A little knowledge is a dangerous thing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 138-152, January.

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