IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v68y2014icp168-180.html
   My bibliography  Save this article

Two-part tariff competition between two-sided platforms

Author

Listed:
  • Reisinger, Markus

Abstract

Two-sided market models in which platforms compete in two-part tariffs, i.e., a subscription and a per-transaction fee, are often plagued by a continuum of equilibria. This paper incorporates heterogeneous trading behavior of agents into the existing framework. We show that this natural and realistic extension yields a unique equilibrium that has several reasonable properties. The equilibrium stays unique as the heterogeneity vanishes, thereby selecting a unique equilibrium from the continuum that exists under homogeneous trading behavior. We show that this equilibrium differs from equilibria obtained through other selection criteria. The analysis also provides novel empirical predictions.

Suggested Citation

  • Reisinger, Markus, 2014. "Two-part tariff competition between two-sided platforms," European Economic Review, Elsevier, vol. 68(C), pages 168-180.
    • Handle: RePEc:eee:eecrev:v:68:y:2014:i:c:p:168-180
    DOI: 10.1016/j.euroecorev.2014.03.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292114000488
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.euroecorev.2014.03.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paul Belleflamme & Eric Toulemonde, 2009. "Negative Intra-Group Externalities In Two-Sided Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 245-272, February.
    2. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    3. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
    4. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
    5. Julian Wright, 2012. "Why payment card fees are biased against retailers," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 761-780, December.
    6. Qihong Liu & Konstantinos Serfes, 2013. "Price Discrimination in Two‐Sided Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 768-786, December.
    7. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    8. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    9. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
    10. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 947-972.
    11. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
    12. ?zlem Bedre-Defolie & Emilio Calvano, 2013. "Pricing Payment Cards," American Economic Journal: Microeconomics, American Economic Association, vol. 5(3), pages 206-231, August.
    13. 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.
    14. Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-953, October.
    15. Csorba, Gergely, 2008. "Screening contracts in the presence of positive network effects," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 213-226, January.
    16. Andrei Hagiu, 2009. "Two‐Sided Platforms: Product Variety and Pricing Structures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1011-1043, December.
    17. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    18. Volker Nocke & Martin Peitz & Konrad Stahl, 2007. "Platform Ownership," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1130-1160, December.
    19. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
    20. Ambrus, Attila, 2006. "Coalitional Rationalizability," Scholarly Articles 3200266, Harvard University Department of Economics.
    21. Renato Gomes & Alessandro Pavan, 2013. "Cross-Subsidization and Matching Design," Discussion Papers 1559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    22. Andrei Hagiu, 2006. "Pricing and Commitment by Two-Sided Platforms," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 720-737, Autumn.
    23. repec:hrv:faseco:4589709 is not listed on IDEAS
    24. Belleflamme, Paul & Peitz, Martin, 2010. "Platform competition and seller investment incentives," European Economic Review, Elsevier, vol. 54(8), pages 1059-1076, November.
    25. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    26. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-1277, November.
    27. Bruno Jullien, 2011. "Competition in Multi-sided Markets: Divide and Conquer," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 186-220, November.
    28. Jean-Charles Rochet Author-Email:rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
    29. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 353-380, August.
    30. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    31. Kenneth Hendricks & R. Preston Mcafee, 2010. "A Theory Of Bilateral Oligopoly," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 391-414, April.
    32. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 34, pages 2221-2299, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Taeki Min & Kyung Jin Min & Hyung Jun Kim, 2024. "Equilibrium pricing structure in a differentiated duopoly: uniform vs. two-part pricing," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(6), pages 527-541, December.
    2. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    3. Belleflamme, Paul & Omrani, Nessrine & Peitz, Martin, 2015. "The economics of crowdfunding platforms," Information Economics and Policy, Elsevier, vol. 33(C), pages 11-28.
    4. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    5. Zhou, Wenli & Liu, Huan & Cao, Ping & Wang, Yaolei, 2024. "Optimal pricing for on-demand service platforms with heterogeneous customer demand frequencies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 189(C).
    6. Belleflamme, Paul & Peitz, Martin & Toulemonde, Eric, 2022. "The tension between market shares and profit under platform competition," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    7. Man Wang & Honghui Deng & Keong G. Leong, 2023. "Innovation investment and subsidy strategy in two-sided market," Information Technology and Management, Springer, vol. 24(4), pages 337-351, December.
    8. Neaketa Chawla & Debasis Mondal, 2022. "Platform competition and price discrimination," Indian Economic Review, Springer, vol. 57(1), pages 1-21, June.
    9. Wenqing Wu & Xuan Huang & Yue Li & Chien-Chi Chu, 2018. "Optimal Quality Strategy and Matching Service on Crowdfunding Platforms," Sustainability, MDPI, vol. 10(4), pages 1-17, April.
    10. Jihwan Do & Nicolás Riquelme, 2024. "Information exchange through secret vertical contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(3), pages 671-707, November.
    11. Belleflamme, Paul & Toulemonde, Eric, 2016. "Who benefits from increased competition among sellers on B2C platforms?," Research in Economics, Elsevier, vol. 70(4), pages 741-751.
    12. Chongqi Wu & Kunpeng Li & Tianqin Shi, 2017. "Supply chain coordination with two-part tariffs under information asymmetry," International Journal of Production Research, Taylor & Francis Journals, vol. 55(9), pages 2575-2589, May.
    13. Adachi, Takanori & Tremblay, Mark J., 2020. "Business-to-business bargaining in two-sided markets," European Economic Review, Elsevier, vol. 130(C).
    14. 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.
    15. Böhme Enrico, 2016. "Second-Degree Price Discrimination on Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 15(2), pages 91-115, June.
    16. Griva, Krina & Vettas, Nikolaos, 2015. "On two-part tariff competition in a homogeneous product duopoly," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 30-41.
    17. Kim, Soo Jin & Pal, Pallavi, 2025. "Quality differentiation and optimal pricing strategy in multi-sided markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 99(C).
    18. Wang, Shiying & Chen, Huimiao & Wu, Desheng, 2019. "Regulating platform competition in two-sided markets under the O2O era," International Journal of Production Economics, Elsevier, vol. 215(C), pages 131-143.
    19. Ganfu Wang & Xingzheng Ai & Li Zhong, 2019. "Managing product variety on online platform: Consumer heterogeneity and diseconomies of scope," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-20, August.
    20. Shekhar, Shiva, 2017. "Homing choice and platform pricing strategy," DICE Discussion Papers 247, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    21. Shekhar Shiva, 2021. "Platform Pricing Choice: Exclusive Deals or Uniform Prices," Review of Network Economics, De Gruyter, vol. 20(3), pages 159-186, September.
    22. Huang, Wentao & Ding, Yanyan & Jian, Sisi, 2024. "Strategic coopetition among transportation service providers considering supply–demand congestion effects and asymmetric bargaining power," Transportation Research Part B: Methodological, Elsevier, vol. 188(C).
    23. Paul Belleflamme & Martin Peitz, 2018. "Platforms and network effects," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 11, pages 286-317, Edward Elgar Publishing.
    24. Lin, Xiaogang & Zhou, Yong-Wu & Xie, Wei & Zhong, Yuanguang & Cao, Bin, 2020. "Pricing and Product-bundling Strategies for E-commerce Platforms with Competition," European Journal of Operational Research, Elsevier, vol. 283(3), pages 1026-1039.
    25. Iñigo Herguera, 2021. "Competencia y regulación de (algunas) plataformas digitales en la UE," Working Papers 2021-10, FEDEA.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Reisinger, Markus, 2010. "Unique Equilibrium in Two-Part Tariff Competition between Two-Sided Platforms," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 308, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    3. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
    4. Paul Belleflamme & Martin Peitz, 2018. "Platforms and network effects," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 11, pages 286-317, Edward Elgar Publishing.
    5. Jeon, Doh-Shin & Jullien, Bruno & Klimenko, Mikhail, 2021. "Language, internet and platform competition," Journal of International Economics, Elsevier, vol. 131(C).
    6. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
    7. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    8. Moraga-Gonzalez, Jose L. & Wildenbeest, Matthijs R., 2011. "Comparison sites," IESE Research Papers D/933, IESE Business School.
      • Jose Luis Moraga-Gonzalez & Matthijs R. Wildenbeest, 2011. "Comparison Sites," Working Papers 2011-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    9. Doh-Shin Jeon & Nikrooz Nasr, 2016. "News Aggregators and Competition among Newspapers on the Internet," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 91-114, November.
    10. Böhme Enrico, 2016. "Second-Degree Price Discrimination on Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 15(2), pages 91-115, June.
    11. Charles Angelucci & Julia Cagé, 2019. "Newspapers in Times of Low Advertising Revenues," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 319-364, August.
    12. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    13. Jullien, Bruno, 2010. "Two-Sided B2B Platforms," TSE Working Papers 11-223, Toulouse School of Economics (TSE), revised Mar 2011.
    14. Jeon, Doh-Shin & Jullien, Bruno & Klimenko, Mikhail, 2012. "Language, Internet and Platform Competition: the case of Search Engine," IDEI Working Papers 742, Institut d'Économie Industrielle (IDEI), Toulouse.
    15. Renato Gomes & Alessandro Pavan, 2013. "Cross-Subsidization and Matching Design," Discussion Papers 1559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    16. Marco Antonielli & Lapo Filistrucchi, 2011. "Collusion and the political differentiation of newspapers," Working Papers 11-26, NET Institute, revised Nov 2011.
    17. Martin Peitz, 2024. "The Economic Theory of Two-Sided Platforms," CRC TR 224 Discussion Paper Series crctr224_2024_584, University of Bonn and University of Mannheim, Germany.
    18. Jullien, Bruno & Pavan, Alessandro, 2013. "Platform Pricing under Dispersed Information," IDEI Working Papers 793, Institut d'Économie Industrielle (IDEI), Toulouse.
    19. Xing Wan & Javier Cenamor & Geoffrey Parker & Marshall Van Alstyne, 2017. "Unraveling Platform Strategies: A Review from an Organizational Ambidexterity Perspective," Sustainability, MDPI, vol. 9(5), pages 1-18, May.
    20. Paul Belleflamme & Martin Peitz, 2019. "Managing competition on a two‐sided platform," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 5-22, January.

    More about this item

    Keywords

    Two-sided markets; Equilibrium uniqueness; Heterogeneous trading behavior; Two-part tariffs;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:68:y:2014:i:c:p:168-180. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.