Market Definition in Two-Sided Markets: Theory and Practice
AbstractDrawing from the economics of two-sided markets, we provide suggestions for the definition of the relevant market in cases involving two-sided platforms, such as media outlets, online intermediaries, payment cards companies and auction houses. We also discuss when a one-sided approach may be harmless and when instead it can potentially lead to a wrong decision. We then show that the current practice of market definition in two-sided markets is only in part consistent with the above suggestions. Divergence between our suggestions and practice is due to the failure to fully incorporate the lessons from the economic theory of two-sided markets, to the desire to be consistent with previous practice and to the higher data requirements and the higher complexity of empirical analysis in cases involving two-sided platforms. In particular, competition authorities have failed to recognize the crucial difference between two-sided transaction and non-transaction markets and have been misled by the traditional argument that where there is no price, there is no market.
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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 wp2013_05.rdf.
Length: 50 pages
Date of creation: 2013
Date of revision:
two-sided markets; two-sided platforms; market definition; SSNIP test; Hypothetical Monopolist test;
Find related papers by JEL classification:
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-COM-2013-04-13 (Industrial Competition)
- NEP-IND-2013-04-13 (Industrial Organization)
- NEP-NET-2013-04-13 (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.:
- Elena Argentesi & Lapo Filistrucchi, 2007.
"Estimating market power in a two-sided market: The case of newspapers,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
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- Filistrucchi, L. & Geradin, D.A.A.G. & Damme, E.E.C. van, 2012.
"Identifying Two-Sided Markets,"
2012-008, Tilburg University, Tilburg Law and Economic Center.
- Filistrucchi, L. & Klein, T.J. & Michielsen, T.O., 2011.
"Assessing Unilateral Merger Effects in a Two-Sided Market: An Application to the Dutch Daily Newspaper Market,"
2011-114, Tilburg University, Center for Economic Research.
- Filistrucchi, L. & Klein, T.J. & Michielsen, T.O., 2011. "Assessing Unilateral Merger Effects in a Two-Sided Market: An Application to the Dutch Daily Newspaper Market," Discussion Paper 2011-046, Tilburg University, Tilburg Law and Economic Center.
- Lapo Filistrucchi & Tobias J. Klein & Thomas Michielsen, 2011. "Assessing Unilateral Merger Effects in a Two-Sided Market: An Application to the Dutch Daily Newspaper Market," Working Papers - Economics wp2011_15.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
- Balmer, Roberto, 2013. "Entry and Competition in Local Newspaper Retail Markets - When two are enough," MPRA Paper 54079, University Library of Munich, Germany.
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