Intermediation and Investment Incentives
AbstractWe analyze whether and how the fact that products are not sold on open or public platforms but on competing for-profit platforms affects sellers’ investment incentives. Investments in cost reduction, quality, or marketing measures are here the joint and coordinated efforts by sellers. We show that, in general, for-profit intermediation is not neutral to such investment incentives. As for-profit intermediaries reduce the rents that are available in the market, one might suspect that sellers have weaker investment incentives with competing for-profit platforms. However, this is not necessarily the case. The reason is that investment incentives affect the size of the network effects and thus competition between intermediaries. In particular, we show that whether for-profit intermediation raises or lowers investment incentives depends on which side of the market singlehomes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6214.
Date of creation: Mar 2007
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Paul, BELLEFLAMME & Martin PEITZ, 2006. "Intermediation and investment incentives," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2006048, Université catholique de Louvain, Département des Sciences Economiques.
- BELLEFLAMME, Paul & PEITZ, Martin, 2006. "Intermediation and investment incentives," CORE Discussion Papers 2006094, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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-2007-03-31 (All new papers)
- NEP-COM-2007-03-31 (Industrial Competition)
- NEP-MIC-2007-03-31 (Microeconomics)
- NEP-NET-2007-03-31 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Rust & George Hall, 2001.
"Middle Men Versus Market Makers: A Theory of Competitive Exchange,"
Cowles Foundation Discussion Papers
1299, Cowles Foundation for Research in Economics, Yale University.
- John Rust & George Hall, 2003. "Middlemen versus Market Makers: A Theory of Competitive Exchange," Journal of Political Economy, University of Chicago Press, vol. 111(2), pages 353-403, April.
- John Rust & George Hall, 2002. "Middlemen versus Market Makers: A Theory of Competitive Exchange," NBER Working Papers 8883, National Bureau of Economic Research, Inc.
- Evans David S., 2003. "Some Empirical Aspects of Multi-sided Platform Industries," Review of Network Economics, De Gruyter, vol. 2(3), pages 1-19, September.
- David S. Evans & Richard Schmalensee, 2005.
"The Industrial Organization of Markets with Two-Sided Platforms,"
NBER Working Papers
11603, National Bureau of Economic Research, Inc.
- David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
- Jean‐Charles Rochet & Jean Tirole, 2006.
"Two‐sided markets: a progress report,"
RAND Journal of Economics,
RAND Corporation, vol. 37(3), pages 645-667, 09.
- Kaiser, Ulrich & Wright, Julian, 2006.
"Price structure in two-sided markets: Evidence from the magazine industry,"
International Journal of Industrial Organization,
Elsevier, vol. 24(1), pages 1-28, January.
- Kaiser, Ulrich & Wright, Julian, 2004. "Price Structure in Two-sided Markets: Evidence from the Magazine Industry?," ZEW Discussion Papers 04-80, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- repec:rus:hseeco:72158 is not listed on IDEAS
- Nocke, Volker & Peitz, Martin & Stahl, Konrad, 2004.
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.
- Nocke, Volker & Peitz, Martin & Stahl, Konrad O., 2004. "Platform Ownership," CEPR Discussion Papers 4657, C.E.P.R. Discussion Papers.
- Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
- Jean-Charles Rochet & Jean Tirole, 2003.
"Platform Competition in Two-Sided Markets,"
Journal of the European Economic Association,
MIT Press, vol. 1(4), pages 990-1029, 06.
- Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
- Daniel F. Spulber, 2002. "Market Microstructure and Incentives to Invest," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 352-381, April.
- Mark Armstrong, 2006.
"Competition in two‐sided markets,"
RAND Journal of Economics,
RAND Corporation, vol. 37(3), pages 668-691, 09.
- Gehrig, Thomas, 1993.
"Intermediation in Search Markets,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 2(1), pages 97-120, Spring.
- Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer, vol. 32(2), pages 353-380, August.
- Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
- repec:ebl:ecbull:v:12:y:2007:i:7:p:1-8 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.