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Platform Competition in Two Sided Markets

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Author Info
Jean-Charles Rochet ()
Jean Triole

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Abstract

Many if not most markets with network externalities are two-sided. To succeed, platforms in industries such as software, portals and media, payment systems and the Internet, must “get both sides of the market on board”. Accordingly, platforms devote much attention to their business model, that is to how they court each side while making money overall. The paper builds a model of platform competition with two-sided markets. It unveils the determinants of price allocation and end-user surplus for different governance structures (profit-maximizing platforms and not-for-profit joint undertakings), and compares the outcomes with those under an integrated monopolist and a Ramsey planner.

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Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp409.

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Date of creation: Feb 2002
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Handle: RePEc:fmg:fmgdps:dp409

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References listed on IDEAS
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.:
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  2. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Blackwell Publishing, vol. 71(2), pages 483-512, 04. [Downloadable!] (restricted)
  3. Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick & Tirole, Jean, 2001. "Internet Interconnection and the Off-Net-Cost Pricing Principle," IDEI Working Papers 130, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  4. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Blackwell Publishing, vol. 50(2), pages 103-22, June. [Downloadable!] (restricted)
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  5. 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)
  6. Doh Shin Jeon & Jean Jacques Laffont & Jean Tirole, 2001. "On the Receiver Pays Principle," Economics Working Papers 561, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  7. 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.
  8. Caillaud, Bernard & Jullien, Bruno, 2001. "Chicken and Egg: Competing Matchmakers," CEPR Discussion Papers 2885, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Drew Fudenberg & Jean Tirole, 1999. "Pricing Under the Threat of Entry by a Sole Supplier of a Network Good," Harvard Institute of Economic Research Working Papers 1873, Harvard - Institute of Economic Research.
  10. Geoffrey G. Parker & Marshall W. Van Alstyne, 2000. "Information Complements, Substitutes, and Strategic Product Design," William Davidson Institute Working Papers Series 299, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  11. Hausman, Jerry A & Leonard, Gregory K & Tirole, Jean, 2003. " On Nonexclusive Membership in Competing Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 43-62, Spring.
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  12. Yanelle, Marie-Odile, 1997. "Banking Competition and Market Efficiency," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 215-39, April. [Downloadable!] (restricted)
  13. Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March. [Downloadable!] (restricted)
  14. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
  15. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August. [Downloadable!] (restricted)
  16. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
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