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The monopoly benchmark on two-sided markets

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  • Mueller, Christopher
  • Boehme, Enrico

Abstract

The literature on the effects of market concentration in platform industries or two-sided markets often compares the competitive outcome against a benchmark. This benchmark is either the “joint management” solution in which one decision maker runs all platforms or a “pure” monopoly with just one platform. Literature has not generally discussed, which benchmark is the appropriate one. We show that the appropriate benchmark, i.e. how many platforms the monopolist will operate, depends on whether agents multi- or singlehome, whether the externalities are positive or negative, and in some cases on the properties of the demand functions. Different situations require different benchmarks. Our results also help to anticipate the effects of proposed platform mergers, where the assessment might crucially depend on the number of platforms after a merger.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34987.

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Date of creation: 01 Nov 2011
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Handle: RePEc:pra:mprapa:34987

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Keywords: two-sided markets; market concentration; monopoly;

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  1. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  2. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-72, September.
  3. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
  4. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
  5. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  6. Ambarish Chandra & Allan Collard-Wexler, 2009. "Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1045-1070, December.
  7. Mark J. McCabe & Christopher M. Snyder, 2007. "Academic Journal Prices in a Digital Age: A Two-Sided Market Model," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 2.
  8. Chaudhri, Vivek, 1998. "Pricing and efficiency of a circulation industry: The case of newspapers," Information Economics and Policy, Elsevier, vol. 10(1), pages 59-76, March.
  9. Simon P. Anderson, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Wiley Blackwell, vol. 72(4), pages 947-972, October.
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