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The tension between market shares and profit under platform competition

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  • Belleflamme, Paul
  • Peitz, Martin
  • Toulemonde, Eric

Abstract

We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This is compatible with higher price-cost margins on one or both sides, noting that in the latter case one margin must be negative. Our finding raises further doubts on using market shares as a measure of market power in platform markets.

Suggested Citation

  • Belleflamme, Paul & Peitz, Martin & Toulemonde, Eric, 2022. "The tension between market shares and profit under platform competition," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:indorg:v:81:y:2022:i:c:s0167718721000990
    DOI: 10.1016/j.ijindorg.2021.102807
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    Cited by:

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    4. Giovannetti, Emanuele & Siciliani, Paolo, 2023. "Platform Competition and Incumbency Advantage under Heterogeneous Lock-in effects," Information Economics and Policy, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Two-sided platforms; Market share; Market power; Oligopoly; Network effects; Antitrust;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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