IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/42863.html
   My bibliography  Save this paper

Competition in two-sided markets (2002 version)

Author

Listed:
  • Armstrong, Mark

Abstract

There are many examples of markets involving two groups of participants who need to interact via intermediaries. Moreover, these intermediaries usually have to compete for business from both groups. Examples include academic publishing (where journals facilitate the interaction between authors and readers), advertising in media markets (where newspapers or TV channels enable adverts from producers to reach consumers), payment systems (where credit cards can be a convenient method of transaction between consumers and retailers), and telecommunications networks (where networks are used to provide links between callers and those who receive calls). The paper surveys recent theoretical work on these two-sided markets. The main questions are (i) what determines which side of the market is subsidized (if either) in order to attract the other side, and (ii) is the resulting outcome socially efficient?

Suggested Citation

  • Armstrong, Mark, 2002. "Competition in two-sided markets (2002 version)," MPRA Paper 42863, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42863
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/42863/1/MPRA_paper_42863.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gehrig, Thomas, 1993. "Intermediation in Search Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 97-120, Spring.
    2. Armstrong, Mark, 1999. "Competition in the Pay-TV Market," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 257-280, December.
    3. Baye, Michael R. & Morgan, John, 2000. "A simple model of advertising and subscription fees," Economics Letters, Elsevier, vol. 69(3), pages 345-351, December.
    4. Gehrig, Thomas, 1998. "Competing markets," European Economic Review, Elsevier, vol. 42(2), pages 277-310, February.
    5. Julian Wright, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
    6. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
    7. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    8. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, March.
    9. Glenn Ellison & Drew Fudenberg & Markus Möbius, 2004. "Competing Auctions," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 30-66, March.
    10. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    11. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    12. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-588, October.
    13. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    14. Geoffrey G. Parker & Marshall W. Van Alstyne, 2000. "Information Complements, Substitutes, and Strategic Product Design," William Davidson Institute Working Papers Series 299, William Davidson Institute at the University of Michigan.
    15. Richard Schmalensee, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    16. Marie-Odile Yanelle, 1997. "Banking Competition and Market Efficiency," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 215-239.
    17. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
    18. van Raalte, Chris & Webers, Harry, 1998. "Spatial competition with intermediated matching," Journal of Economic Behavior & Organization, Elsevier, vol. 34(3), pages 477-488, March.
    19. Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March.
    20. Yanelle, Marie-Odile, 1989. "The strategic analysis of intermediation," European Economic Review, Elsevier, vol. 33(2-3), pages 294-301, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carlos Alós-Ferrer & Georg Kirchsteiger & Markus Walzl, 2010. "On the Evolution of Market Institutions: The Platform Design Paradox," Economic Journal, Royal Economic Society, vol. 120(543), pages 215-243, March.
    2. Yuan, Michael Y., 2008. "The effects of barriers to entry on monopolistic intermediary online services: The case of a digital library," Socio-Economic Planning Sciences, Elsevier, vol. 42(1), pages 56-73, March.
    3. Geoffrey G. Parker & Marshall W. Van Alstyne, 2005. "Two-Sided Network Effects: A Theory of Information Product Design," Management Science, INFORMS, vol. 51(10), pages 1494-1504, October.
    4. Foros, Øystein & Kind, Hans Jarle & Wyndham, Tim, 2019. "Tax-free digital news?," International Journal of Industrial Organization, Elsevier, vol. 66(C), pages 119-136.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
    2. Graeme Guthrie & Julian Wright, 2007. "Competing Payment Schemes," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 37-67, March.
    3. Simon Loertscher, 2005. "Market making oligopoly," Diskussionsschriften dp0512, Universitaet Bern, Departement Volkswirtschaft.
    4. David S. Evans & Richard Schmalensee, 2005. "The economics of interchange fees and their regulation : an overview," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 73-120.
    5. ?zlem Bedre-Defolie & Emilio Calvano, 2013. "Pricing Payment Cards," American Economic Journal: Microeconomics, American Economic Association, vol. 5(3), pages 206-231, August.
    6. Aurazo Jose & Vasquez Jose, 2019. "Merchant Card Acceptance: An Extension of the Tourist Test for Developing Countries," Review of Network Economics, De Gruyter, vol. 18(2), pages 109-139, June.
    7. Wang, Zhu, 2010. "Market structure and payment card pricing: What drives the interchange?," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 86-98, January.
    8. Rochet, Jean Charles & Tirole, Jean, 2008. "Tying in two-sided markets and the honor all cards rule," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1333-1347, November.
    9. Bolt, Wilko & Schmiedel, Heiko, 2009. "SEPA, efficiency, and payment card competition," Working Paper Series 1140, European Central Bank.
    10. Zenger, Hans, 2012. "Differentiated interchange fees," Economics Letters, Elsevier, vol. 115(2), pages 276-278.
    11. Andrei Hagiu, 2004. "Two-Sided Platforms: Pricing and Social Efficiency," Discussion papers 04035, Research Institute of Economy, Trade and Industry (RIETI).
    12. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    13. Ron Borzekowski & Elizabeth K. Kiser & Mark D. Manuszak & Robin A. Prager, 2009. "Interchange fees and payment card networks: economics, industry developments, and policy issues," Finance and Economics Discussion Series 2009-23, Board of Governors of the Federal Reserve System (U.S.).
    14. James J. McAndrews & Zhu Wang, 2008. "The economics of two-sided payment card markets: pricing, adoption and usage," Research Working Paper RWP 08-12, Federal Reserve Bank of Kansas City.
    15. Rong Ding & Julian Wright, 2017. "Payment Card Interchange Fees and Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 39-72, March.
    16. Stuart E. Weiner & Julian Wright, 2005. "Interchange fees in various countries : developments and determinants," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 5-49.
    17. Dietl Helmut & Duschl Tobias & Franck Egon & Lang Markus, 2012. "A Contest Model of a Professional Sports League with Two-Sided Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(3), pages 336-359, June.
    18. Ding, Rong, 2014. "Merchant internalization revisited," Economics Letters, Elsevier, vol. 125(3), pages 347-349.
    19. Marc Rysman, 2007. "An Empirical Analysis Of Payment Card Usage," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 1-36, March.
    20. Zhu Wang, 2013. "Demand externalitites and price cap regulation: Learning from a two-sided market," Working Paper 13-06, Federal Reserve Bank of Richmond.

    More about this item

    Keywords

    Two-sided markets; oligopoly; network effects; intermediation;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:42863. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.