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Market Definition in Two-Sided Markets: Theory and Practice

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Author Info

  • Lapo Filistrucchi

    ()
    (DISEI, Università degli studi di Firenze)

  • Damien Geradin
  • Eric van Damme
  • Pauline Affeldt

Abstract

Drawing 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 Info

Paper 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.

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Length: 50 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:frz:wpaper:wp2013_05.rdf

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Related research

Keywords: two-sided markets; two-sided platforms; market definition; SSNIP test; Hypothetical Monopolist test;

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References

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  1. 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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Cited by:
  1. Filistrucchi, L. & Geradin, D.A.A.G. & Damme, E.E.C. van, 2012. "Identifying Two-Sided Markets," Discussion Paper 2012-008, Tilburg University, Tilburg Law and Economic Center.
  2. 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 2011-114, Tilburg University, Center for Economic Research.
  3. 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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