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The Elasticity Pricing Rule for Two-sided Markets: A Note

Author

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  • Krueger Malte

    (Department of Business and Law, University of Applied Sciences, Frankfurt)

Abstract

Rochet and Tirole have derived an elasticity rule for relative prices in two-sided markets. This rule is seen as counterintuitive because it seems to imply that the "more elastic side of the market" is charged more. In this note it is argued that this interpretation is based on the assumption that elasticity of demand can be treated as a parameter. If elasticity is treated as function of price, the Rochet-Tirole rule is perfectly in line with economic intuition.

Suggested Citation

  • Krueger Malte, 2009. "The Elasticity Pricing Rule for Two-sided Markets: A Note," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-8, September.
    • Handle: RePEc:bpj:rneart:v:8:y:2009:i:3:n:4
    DOI: 10.2202/1446-9022.1180
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    Cited by:

    1. Carbó-Valverde Santiago & Liñares-Zegarra José Manuel & Rodríguez-Fernández Francisco, 2012. "Feedback Loop Effects in Payment Card Markets: Empirical Evidence," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-24, June.
    2. Joshua D. Wright & John M. Yun, 2019. "Burdens and Balancing in Multisided Markets: The First Principles Approach of Ohio v. American Express," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(4), pages 717-740, June.
    3. Dennis Weisman & Soheil Nadimi, 2019. "A note on price regulation in two-sided markets," Economics Bulletin, AccessEcon, vol. 39(4), pages 2766-2777.
    4. Creti, Anna & Verdier, Marianne, 2014. "Fraud, investments and liability regimes in payment platforms," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 84-93.
    5. Andras Niedermayer & Artyom Shneyerov, 2014. "For‐Profit Search Platforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 765-789, August.
    6. Steffen, Nico & Wiewiorra, Lukas & Kroon, Peter, 2021. "Wettbewerb und Regulierung in der Plattform- und Datenökonomie," WIK Discussion Papers 481, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    7. Kenneth Fjell & Debashis Pal, 2021. "Adjusted repeated myopic use of the inverse elasticity pricing rule," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(5), pages 559-565, October.
    8. Niedermayer, Andras & Shneyerov, Artyom, 2013. "For-Profit Search Platforms," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 436, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Artyom Shneyerov & Andras Niedermayer, 2011. "Search Brokers," 2011 Meeting Papers 89, Society for Economic Dynamics.

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