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Optimal Tariffs on a Monopoly Platform in Two-sided Markets

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  • KAO Kuo-Feng
  • MUKUNOKI Hiroshi

Abstract

This study investigates how countries set import tariffs on a monopoly platform’s product in a two-sided market. Consumers and service providers interact through the platform’s product, wherein service providers’ entries spur product demand and larger demand invokes more entries. Optimal import policies for importing countries are subsidies when network externalities and the number of importing countries are large, while they are tariffs when they are small. There is a case where optimal non-cooperative policies are import tariffs, but optimal cooperative policies are import subsidies. These results suggest that promoting digital trade and cooperative actions in tariff settings is important to advance trade liberalization for the platform’s products.

Suggested Citation

  • KAO Kuo-Feng & MUKUNOKI Hiroshi, 2022. "Optimal Tariffs on a Monopoly Platform in Two-sided Markets," Discussion papers 22066, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:22066
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    References listed on IDEAS

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