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A note on price regulation in two-sided markets

Author

Listed:
  • Dennis Weisman

    (Kansas State University)

  • Soheil Nadimi

    (Kansas State University)

Abstract

This paper examines price level regulation in two-sided markets with linear demands. We find that (i) price level regulation increases the price allocation asymmetry when reservation prices differ between the two sides of the market; and (ii) changes in the level of the price cap are divided equally between the two sides of the market whether demands are symmetric or asymmetric. Finally, and potentially important from a policy perspective, the numerical simulations suggest that the efficiency gains from price level regulation are relatively modest for a wide range of cost parameters.

Suggested Citation

  • Dennis Weisman & Soheil Nadimi, 2019. "A note on price regulation in two-sided markets," Economics Bulletin, AccessEcon, vol. 39(4), pages 2766-2777.
    • Handle: RePEc:ebl:ecbull:eb-19-00694
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I4-P258.pdf
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    References listed on IDEAS

    as
    1. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    2. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    3. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    4. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    5. Wang, Zhu, 2016. "Price cap regulation in a two-sided market: Intended and unintended consequences," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 28-37.
    6. Weisman Dennis L, 2010. "Optimal Price Allocations in Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 9(3), pages 1-10, August.
    7. Krueger Malte, 2009. "The Elasticity Pricing Rule for Two-sided Markets: A Note," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-8, September.
    8. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    two-sided markets; price allocations; regulation; efficiency;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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