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The Tension Between Market Shares and Profit Under Platform Competition

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  • Paul Belleflamme
  • Martin Peitz
  • Eric Toulemonde

Abstract

We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This platform enjoys a competitive advantage on one or both sides. Our finding raises further doubts on using market shares as a measure of market power in platform markets.

Suggested Citation

  • Paul Belleflamme & Martin Peitz & Eric Toulemonde, 2020. "The Tension Between Market Shares and Profit Under Platform Competition," CRC TR 224 Discussion Paper Series crctr224_2021_204v2, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2021_204v2
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    References listed on IDEAS

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    Cited by:

    1. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," CEPR Discussion Papers 16480, C.E.P.R. Discussion Papers.
    2. Sato, Susumu, 2021. "Market shares and profits in two-sided markets," Economics Letters, Elsevier, vol. 207(C).

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    More about this item

    Keywords

    Two-sided platforms; market share; market power; oligopoly; network effects; antitrust;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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