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Negative Intra-Group Externalities in Two-Sided Markets

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Author Info
Paul Belleflamme ()
Eric Toulemonde ()

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Abstract

Two types of agents interact on a pre-existing free platform. Agents value positively the presence of agents of the other type but may value negatively the presence of agents of their own type. We ask whether a new platform can find fees and subsidies so as to divert agents from the existing platform and make a profit. We show that this might be impossible if intra-group negative externalities are sufficiently (but not too) strong with respect to positive inter-group externalities.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 2011.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2011

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Related research
Keywords: two-sided markets naked exclusion divide and conquer

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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    Other versions:
    • Jean-Charles Rochet Author-Email: rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
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    Other versions:
  5. Ilya R. Segal & Michael D. Whinston, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March. [Downloadable!] (restricted)
  6. Volker Nocke & Martin Peitz & Konrad Stahl, 2004. "Platform Ownership," Discussion Papers 16, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  7. Jullien, Bruno, 2001. "Competing with Network Externalities and Price Discrimination," CEPR Discussion Papers 2883, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. ROCHET, Jean-Charles & TIROLE, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  9. Segal, Ilya, 2003. "Coordination and discrimination in contracting with externalities: divide and conquer?," Journal of Economic Theory, Elsevier, vol. 113(2), pages 147-181, December. [Downloadable!] (restricted)
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    Other versions:
  13. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June. [Downloadable!] (restricted)
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    Other versions:
  15. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
  16. Genicot, Garance & Ray, Debraj, 2006. "Contracts and externalities: How things fall apart," Journal of Economic Theory, Elsevier, vol. 131(1), pages 71-100, November. [Downloadable!] (restricted)
    Other versions:
  17. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August. [Downloadable!] (restricted)
  18. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
    Other versions:
  19. Bruno Jullien, 2004. "Two-Sided Markets and Electronic Intermediaries," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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