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Two-Sided Markets: A Progress Report


  • Jean-Charles Rochet Author-Workplace-Name: IDEI, University of Toulouse
  • Jean Tirole Author-Email: Author-Workplace-Name: IDEI, University of Toulouse


I describe a model of entry with endogenous product-type choices. These choices are formalized as the outcomes of a game of incomplete information in which rivals' differentiated products have nonuniform competitive effects on profits. I estimate the model for location choices in the video retail industry using a nested fixed-point algorithm solution. The results imply significant returns to product differentiation. Simulations illustrate the trade off between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry.

Suggested Citation

  • Jean-Charles Rochet Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: 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.
  • Handle: RePEc:rje:randje:v:37:y:2006:3:p:645-667

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