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Armstrong meets Rochet–Tirole: On the equivalence of different pricing structures in two-sided markets

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  • Bajo-Buenestado, Raúl
  • Kinateder, Markus

Abstract

We formally show that lump-sum participation fees and per-interaction fees charged by a monopoly platform in a two-sided market are not interchangeable in the presence of price distortions, such as ad valorem taxes.

Suggested Citation

  • Bajo-Buenestado, Raúl & Kinateder, Markus, 2019. "Armstrong meets Rochet–Tirole: On the equivalence of different pricing structures in two-sided markets," Economics Letters, Elsevier, vol. 177(C), pages 43-46.
    • Handle: RePEc:eee:ecolet:v:177:y:2019:i:c:p:43-46
    DOI: 10.1016/j.econlet.2019.01.022
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    References listed on IDEAS

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    1. Maya Bacache-Beauvallet, 2018. "Special issue on taxation in the digital economy," Post-Print hal-02163803, HAL.
    2. Creti, Anna & Verdier, Marianne, 2014. "Fraud, investments and liability regimes in payment platforms," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 84-93.
    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. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2009. "On revenue and welfare dominance of ad valorem taxes in two-sided markets," Economics Letters, Elsevier, vol. 104(2), pages 86-88, August.
    5. Yuqing Zheng & Harry Kaiser, 2013. "Optimal quality threshold of admission in a two-sided farmers’ market," Applied Economics, Taylor & Francis Journals, vol. 45(23), pages 3360-3369, August.
    6. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2008. "Efficiency enhancing taxation in two-sided markets," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1531-1539, June.
    7. Bolt, Wilko & Tieman, Alexander F., 2008. "Heavily skewed pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1250-1255, September.
    8. Martin Peitz & Sven Rady & Piers Trepper, 2017. "Experimentation in Two-Sided Markets," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 128-172.
    9. Maya Bacache‐Beauvallet & Francis Bloch, 2018. "Special issue on taxation in the digital economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 5-8, February.
    10. 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.
    11. Hagiu, Andrei & Hałaburda, Hanna, 2014. "Information and two-sided platform profits," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 25-35.
    12. Anna Creti & Marianne Verdier, 2014. "Investments and Liability Regimes in Payment Platforms," Post-Print hal-01111164, HAL.
    13. repec:dau:papers:123456789/13540 is not listed on IDEAS
    14. Chokri Aloui & Khaïreddine Jebsi, 2010. "Optimal pricing of a two-sided monopoly platform with a one-sided congestion effect," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(4), pages 423-439, December.
    15. Weyl, E. Glen, 2009. "Monopoly, Ramsey and Lindahl in Rochet and Tirole (2003)," Economics Letters, Elsevier, vol. 103(2), pages 99-100, May.
    16. Ming Gao, 2018. "Platform Pricing In Mixed Two‐Sided Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1103-1129, August.
    17. Paul Belleflamme & Eric Toulemonde, 2018. "Tax incidence on competing two‐sided platforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 9-21, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Yang Geng & Yulin Zhang & Jing Li, 2023. "Two-sided competition, platform services and online shopping market structure," Journal of Economics, Springer, vol. 138(2), pages 95-127, March.
    2. Raúl Bajo-Buenestado & Markus Kinateder & Raul Bajo-Buenestado, 2023. "Prices and Mergers in a General Model of Multi-Sided Markets," CESifo Working Paper Series 10818, CESifo.

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    More about this item

    Keywords

    Two-sided market; Platform pricing; Pricing structure; Taxation; Price distortions;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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