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Price-Increasing Competition on Two-Sided Markets with Homogeneous Platforms

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  • Enrico Böhme
  • Christopher Müller

Abstract

We make a case for price-increasing competition on “competitive bottleneck” two-sided markets. We argue that demand interrelation might be sufficient to cause either no observable price effect of competition or price-increasing competition. Under price equality, total demand on both market sides in the duopoly market exceeds total demand in the monopoly market. Furthermore, even though there is no observable price effect, there is still a competitive effect that becomes manifest in total duopoly equilibrium profits being strictly smaller than monopoly profits. The relationship of total welfare is ambiguous in subsidization cases, while without subsidization, welfare is strictly greater in duopoly. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Enrico Böhme & Christopher Müller, 2013. "Price-Increasing Competition on Two-Sided Markets with Homogeneous Platforms," Journal of Industry, Competition and Trade, Springer, vol. 13(4), pages 453-479, December.
    • Handle: RePEc:kap:jincot:v:13:y:2013:i:4:p:453-479
    DOI: 10.1007/s10842-012-0137-6
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    More about this item

    Keywords

    two-sided markets; platform competition; price-concentration relationship; welfare analysis; price-increasing competition; D42; D43; K20; L12; L13; L51;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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