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Two-Sided Competition and Differentiation (with an Application to Media)

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Author Info

  • Guillaume Roger

    ()
    (School of Economics, The University of New South Wales)

Abstract

We model a duopoly in which two-sided platforms compete on both sides of a two-sided market. Platforms (or intermediaries) select the quality they offer consumers, and the prices they charge to consumers and firms. In this model, non-trivial competition on both sides induces non-quasiconcave payoffs in one subgame. All equilibria are characterized. Under well-defined conditions, the unique equilibrium in pure strategies can be computed. Prices entail a discount on one side, a premium on the other one and the quality offered to consumers is distorted downward. When the pure-strategy equilibrium fails to exist, a mixed-strategy equilibrium is shown to always exist and the distributions are characterized. In this case, the market may be preempted ex post. The model may find applications in the media, internet trading platforms, the software industry or even the health care industry (HMO/PPO).

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File URL: http://research.economics.unsw.edu.au/RePEc/papers/2010-27.pdf
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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2010-27.

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Length: 38 pages
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:swe:wpaper:2010-27

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Related research

Keywords: Two-Sided Market; Vertical Differentiation; Industrial Organization; Platform Competition;

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  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.
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Cited by:
  1. A. Blasco & P. Pin & F. Sobbrio, 2011. "Paying Positive to Go Negative: Advertisers' Competition and Media Reports," Working Papers wp772, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. A. Blasco & F. Sobbrio, 2011. "Competition and Commercial Media Bias," Working Papers wp767, Dipartimento Scienze Economiche, Universita' di Bologna.

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