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Competition in two‐sided markets

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  • Mark Armstrong

Abstract

There 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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  • Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
  • Handle: RePEc:bla:randje:v:37:y:2006:i:3:p:668-691
    DOI: j.1756-2171.2006.tb00037.x
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