Upward Pricing Pressure in Two‐sided Markets
Abstract: Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.
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Volume (Year): 123 (2013)
Issue (Month): 11 (November)
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- Lapo Filistrucchi & Tobias Klein & Thomas Michielsen, 2010. "Merger Simulation in a Two-Sided Market: The Case of the Dutch Daily Newspapers," Working Papers 10-15, NET Institute.
- Sonia Jaffe & Glen Weyl, 2011. "Price Theory and Merger Guidelines, II," Antitrust Chronicle, Competition Policy International, vol. 12.
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De Gruyter, vol. 10(1), pages 1-41, March.
- Shapiro, Carl & Farrell, Joseph, 2008. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," Department of Economics, Working Paper Series qt35c5f846, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Farrell, Joseph & Shapiro, Carl, 2008. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," Competition Policy Center, Working Paper Series qt8z51b1q8, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Werden, Gregory J, 1996.
"A Robust Test for Consumer Welfare Enhancing Mergers among Sellers of Differentiated Products,"
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Wiley Blackwell, vol. 44(4), pages 409-13, December.
- Werden, G.J., 1996. "A Robust Test for Consumer Welfare Enhancing Mergers Among Sellers of Differentiated Products," Papers 96-01, U.S. Department of Justice - Antitrust Division.
- Sonia Jaffe & E. Glen Weyl, 2013. "The First-Order Approach to Merger Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 188-218, November.
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