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Two-Sided Markets : A Progress Report

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  • Rochet, Jean-Charles
  • Tirole, Jean

Abstract

I describe a model of entry with endogenous product-type choices. These choices are formalized as the outcomes of a game of incomplete information in which rivals' differentiated products have nonuniform competitive effects on profits. I estimate the model for location choices in the video retail industry using a nested fixed-point algorithm solution. The results imply significant returns to product differentiation. Simulations illustrate the trade off between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry. Ordering information: This article can be ordered from http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi?action=buy&year=2006&issue=aut&page=645&tid=30492&sc=1869P1N9 .

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Bibliographic Info

Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 275.

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Date of creation: Nov 2005
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Publication status: Published in The RAND Journal of Economics, vol. 35, n°3, 2006, p. 645-667.
Handle: RePEc:ide:wpaper:2145

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  1. Bulow, Jeremy I. & Levin, Jonathan, 2003. "Matching and Price Competition," Research Papers 1818, Stanford University, Graduate School of Business.
  2. Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick & Tirole, Jean, 2003. "Internet Interconnection and the Off-Net-Cost Pricing Principle," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
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  7. Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
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  24. Jorge A, Ferrando & Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Two-Sided Network Effects and Competition : An Application to Media Industries," Working Papers 2004-09, Centre de Recherche en Economie et Statistique.
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