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Two-part tariff competition between two-sided platforms

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  • Reisinger, Markus
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    Abstract

    Two-sided market models in which platforms compete in two-part tariffs, i.e., a subscription and a per-transaction fee, are often plagued by a continuum of equilibria. This paper incorporates heterogeneous trading behavior of agents into the existing framework. We show that this natural and realistic extension yields a unique equilibrium that has several reasonable properties. The equilibrium stays unique as the heterogeneity vanishes, thereby selecting a unique equilibrium from the continuum that exists under homogeneous trading behavior. We show that this equilibrium differs from equilibria obtained through other selection criteria. The analysis also provides novel empirical predictions.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Economic Review.

    Volume (Year): 68 (2014)
    Issue (Month): C ()
    Pages: 168-180

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    Handle: RePEc:eee:eecrev:v:68:y:2014:i:c:p:168-180

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    Web page: http://www.elsevier.com/locate/eer

    Related research

    Keywords: Two-sided markets; Equilibrium uniqueness; Heterogeneous trading behavior; Two-part tariffs;

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