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Platform Competition in Two-Sided Markets

Author

Listed:
  • Jean-Charles Rochet

    (Université de Toulouse, Institut D'Economie Industrielle)

  • Jean Tirole

    (Institut D'Economie Industrielle, Centre d'Etudes et de Recherches en Analyse Socio-Economique)

Abstract

Many if not most markets with network externalities are two-sided. To succeed, platforms in industries such as software, portals and media, payment systems and the Internet, must "get both sides of the market on board." Accordingly, platforms devote much attention to their business model, that is, to how they court each side while making money overall. This paper builds a model of platform competition with two-sided markets. It unveils the determinants of price allocation and end-user surplus for different governance structures (profit-maximiz-ing platforms and not-for-profit joint undertakings), and compares the outcomes with those under an integrated monopolist and a Ramsey planner. (JEL: L5, L82, L86, L96) Copyright (c) 2003 The European Economic Association.

Suggested Citation

  • 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.
  • Handle: RePEc:tpr:jeurec:v:1:y:2003:i:4:p:990-1029
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    References listed on IDEAS

    as
    1. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
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    More about this item

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J1 - Labor and Demographic Economics - - Demographic Economics

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