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Platform Competition in Two-Sided Markets

  • 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)

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.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 1 (2003)
Issue (Month): 4 (06)
Pages: 990-1029

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Handle: RePEc:tpr:jeurec:v:1:y:2003:i:4:p:990-1029
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