Competition in Two-Sided Markets
AbstractThere are many examples of markets involving two groups of agents who need to interact via 'platforms', and where one group's benefit from joining a platform depends on the number of agents from the other group who join the same platform. This paper presents theoretical models for three variants of such markets: a monopoly platform; a model of competing platforms where each agent must choose to join a single platform; and a model of 'competing bottlenecks', where one group wishes to join all platforms. The main determinants of equilibrium prices are (i) the relative sizes of the cross-group externalities, (ii) whether fees are levied on a lump-sum or per-transaction basis, and (iii) whether a group joins just one platform or joins all platforms.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0505009.
Length: 32 pages
Date of creation: 25 May 2005
Date of revision:
Note: Type of Document - pdf; pages: 32
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Two-sided markets; network externalities; supermarkets; advertising;
Other versions of this item:
- L - Industrial Organization
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-29 (All new papers)
- NEP-COM-2005-05-29 (Industrial Competition)
- NEP-MIC-2005-05-29 (Microeconomics)
- NEP-NET-2005-05-29 (Network Economics)
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