AbstractWe develop a general theoretical framework of trade on a platform on which buyers and sellers interact. The platform may be owned by a single large, or many small independent or vertically integrated intermediaries. There also may be free entry into the market for platform slots, or platform owners my form a club that restricts entry. We provide a positive and normative analysis of the impact of platform ownership structure on platform size. The strength of network effects is important in the ranking of ownership structures by induced equilibrium platform size and welfare. We develop an intuitive taxonomy of these towards developing our results. We show that while vertical integration may be welfare-enhancing if network effects are weak, monopoly platform ownership is socially preferred if they are strong. These are also the ownership structures likely to emerge.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4657.
Date of creation: Oct 2004
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Other versions of this item:
- Nocke, Volker & Peitz, Martin & Stahl, Konrad, 2004. "Platform Ownership," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 16, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Volker Nocke & Martin Peitz & Konrad Stahl, 2004. "Platform Ownership," PIER Working Paper Archive 04-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-13 (All new papers)
- NEP-COM-2005-02-13 (Industrial Competition)
- NEP-MIC-2005-02-13 (Microeconomics)
- NEP-NET-2005-02-13 (Network Economics)
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