Upward Pricing Pressure in Two-Sided Markets
AbstractPricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.
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Bibliographic InfoPaper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Economics with number wp2012_15.rdf.
Length: 29 pages
Date of creation: 2012
Date of revision:
Merger evaluation; two-sided markets; network effects; UPP.;
Other versions of this item:
- Affeldt, P. & Filistrucchi, L. & Klein, T.J., 2012. "Upward Pricing Pressure in Two-Sided Markets," Discussion Paper 2012-029, Tilburg University, Tilburg Law and Economic Center.
- Affeldt, P. & Filistrucchi, L. & Klein, T.J., 2012. "Upward Pricing Pressure in Two-Sided Markets," Discussion Paper 2012-069, Tilburg University, Center for Economic Research.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-COM-2012-09-03 (Industrial Competition)
- NEP-IND-2012-09-03 (Industrial Organization)
- NEP-MKT-2012-09-03 (Marketing)
- NEP-NET-2012-09-03 (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.:
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DICE Discussion Papers
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