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Estimating Platform Market Power in Two-Sided Markets with an Application to Magazine Advertising

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  • Minjae Song

    (University of Rochester)

Abstract

In this paper I estimate platform markups in two-sided markets using structural models of platform demand. My models and estimation procedure are applicable to general two-sided market settings where agents on each side care about the presence of agents on the other side and platforms set two membership prices to maximize the sum of profits. Using data on TV magazines in Germany I show that the magazines typically set copy prices below marginal costs and earn profits from selling advertising pages. I also show that mergers are much less anticompetitive than in one-sided markets and could even be welfare enhancing.

Suggested Citation

  • Minjae Song, 2013. "Estimating Platform Market Power in Two-Sided Markets with an Application to Magazine Advertising," 2013 Meeting Papers 1264, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:1264
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    References listed on IDEAS

    as
    1. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
    2. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    3. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
    4. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 483-512.
    5. 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.
    6. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    7. 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.
    8. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    9. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Lapo Filistrucchi & Damien Geradin & Eric van Damme, 2012. "Identifying Two-Sided Markets," Working Papers - Economics wp2012_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    2. Lapo Filistrucchi & Tobias J. Klein & Thomas O. Michielsen, 2012. "Assessing Unilateral Merger Effects in the Dutch Daily Newspaper Market," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.), Recent Advances in the Analysis of Competition Policy and Regulation, chapter 10, Edward Elgar Publishing.
    3. Charles Angelucci & Julia Cagé, 2019. "Newspapers in Times of Low Advertising Revenues," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 319-364, August.
    4. Ivaldi, Marc & Zhang, Jiekai, 2015. "Advertising competition in the French free-to-air television broadcasting industry," TSE Working Papers 15-578, Toulouse School of Economics (TSE), revised Apr 2018.
    5. Marc Ivaldi & Jiekai Zhang, 2017. "Advertising Competition in the Free-to-Air TV Broadcasting Industry," CESifo Working Paper Series 6461, CESifo.
    6. Lapo Filistrucchi & Tobias J. Klein & Thomas O. Michielsen, 2012. "Assessing Unilateral Merger Effects In A Two-Sided Market: An Application To The Dutch Daily Newspaper Market," Journal of Competition Law and Economics, Oxford University Press, vol. 8(2), pages 297-329.
    7. Marleen Marra, 2019. "Pricing and Fees in Auction Platforms with Two-Sided Entry," Working Papers hal-03393068, HAL.
    8. Eduardo Pontual Ribeiro & Svetlana Golovanova, 2020. "A Unified Presentation Of Competition Analysis In Two‐Sided Markets," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 548-571, July.
    9. repec:hal:spmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    10. repec:hal:wpspec:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    11. repec:hal:spmain:info:hdl:2441/4edekc99or8n2bu86nu4ua8adl is not listed on IDEAS
    12. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    13. Robert Seamans & Feng Zhu, 2014. "Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers," Management Science, INFORMS, vol. 60(2), pages 476-493, February.
    14. S. Sriram & Puneet Manchanda & Mercedes Bravo & Junhong Chu & Liye Ma & Minjae Song & Scott Shriver & Upender Subramanian, 2015. "Platforms: a multiplicity of research opportunities," Marketing Letters, Springer, vol. 26(2), pages 141-152, June.
    15. repec:hal:spmain:info:hdl:2441/26t617gatp86qree1dejcpchbr is not listed on IDEAS
    16. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.

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