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Armstrong meets Rochet–Tirole: On the equivalence of different pricing structures in two-sided markets

Author

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  • Bajo-Buenestado, Raúl
  • Kinateder, Markus

Abstract

We formally show that lump-sum participation fees and per-interaction fees charged by a monopoly platform in a two-sided market are not interchangeable in the presence of price distortions, such as ad valorem taxes.

Suggested Citation

  • Bajo-Buenestado, Raúl & Kinateder, Markus, 2019. "Armstrong meets Rochet–Tirole: On the equivalence of different pricing structures in two-sided markets," Economics Letters, Elsevier, vol. 177(C), pages 43-46.
    • Handle: RePEc:eee:ecolet:v:177:y:2019:i:c:p:43-46
    DOI: 10.1016/j.econlet.2019.01.022
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    References listed on IDEAS

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    1. Maya Bacache-Beauvallet & Francis Bloch, 2018. "Special issue on taxation in the digital economy," PSE-Ecole d'économie de Paris (Postprint) halshs-01883890, HAL.
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    4. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2009. "On revenue and welfare dominance of ad valorem taxes in two-sided markets," Economics Letters, Elsevier, vol. 104(2), pages 86-88, August.
    5. Yuqing Zheng & Harry Kaiser, 2013. "Optimal quality threshold of admission in a two-sided farmers’ market," Applied Economics, Taylor & Francis Journals, vol. 45(23), pages 3360-3369, August.
    6. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2008. "Efficiency enhancing taxation in two-sided markets," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1531-1539, June.
    7. Bolt, Wilko & Tieman, Alexander F., 2008. "Heavily skewed pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1250-1255, September.
    8. Martin Peitz & Sven Rady & Piers Trepper, 2017. "Experimentation in Two-Sided Markets," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 128-172.
    9. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    10. Hagiu, Andrei & Hałaburda, Hanna, 2014. "Information and two-sided platform profits," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 25-35.
    11. Anna Creti & Marianne Verdier, 2014. "Investments and Liability Regimes in Payment Platforms," Post-Print hal-01111164, HAL.
    12. repec:dau:papers:123456789/13540 is not listed on IDEAS
    13. Chokri Aloui & Khaïreddine Jebsi, 2010. "Optimal pricing of a two-sided monopoly platform with a one-sided congestion effect," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(4), pages 423-439, December.
    14. Maya Bacache‐Beauvallet & Francis Bloch, 2018. "Special issue on taxation in the digital economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 5-8, February.
    15. Weyl, E. Glen, 2009. "Monopoly, Ramsey and Lindahl in Rochet and Tirole (2003)," Economics Letters, Elsevier, vol. 103(2), pages 99-100, May.
    16. Ming Gao, 2018. "Platform Pricing In Mixed Two‐Sided Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1103-1129, August.
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    Cited by:

    1. Raúl Bajo-Buenestado & Markus Kinateder & Raul Bajo-Buenestado, 2023. "Prices and Mergers in a General Model of Multi-Sided Markets," CESifo Working Paper Series 10818, CESifo.
    2. Poddar, Sangita & Banerjee (Chatterjee), Tanmoyee, 2024. "Hybrid role of two-sided platform with one-sided congestion," Research in Economics, Elsevier, vol. 78(1), pages 83-98.
    3. Yang Geng & Yulin Zhang & Jing Li, 2023. "Two-sided competition, platform services and online shopping market structure," Journal of Economics, Springer, vol. 138(2), pages 95-127, March.
    4. Sangita Poddar & Tanmoyee Banerjee (Chatterjee) & Swapnendu Banerjee, 2024. "A theoretical analysis on two‐sided duopoly platforms and tax regimes," International Journal of Economic Theory, The International Society for Economic Theory, vol. 20(1), pages 88-119, March.

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    More about this item

    Keywords

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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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