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Monopolies in Two-Sided Markets: Comparative Statics and Identification

  • Weyl, E. Glen

Many models of monopoly in two-sided markets have been proposed (Rochet and Tirole, 2006), but little is known about them. I provide a full set of comparative statics for three models, one that generalizes that of Rochet and Tirole (2003), a second that generalizes Armstrong (2006) and a third that fuses the two models. This answers a number of questions central to the theoretical literature, such as the effects of market power and price controls and the relationship between different models. I also show how, given exogenous cost variations, these models can be almost fully (locally) identified (e.g. market power and predatory pricing), tested and distinguished from one another. I highlight applications of the results to a wide variety of theoretical, empirical and policy questions, including merger analysis.

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Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt69c9c56z.

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Date of creation: 31 Oct 2008
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Handle: RePEc:cdl:econwp:qt69c9c56z
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  1. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
  2. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October.
  3. David S. Evans & Andrei Hagiu & Richard Schmalensee, 2006. "Invisible Engines: How Software Platforms Drive Innovation and Transform Industries," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262050854, June.
  4. 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.
  5. Wilko Bolt & Alexander F Tieman, 2005. "Skewed Pricing in Two-Sided Markets: An IO approach," Money Macro and Finance (MMF) Research Group Conference 2005 75, Money Macro and Finance Research Group.
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  7. Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006. "CO 2 cost pass-through and windfall profits in the power sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
  8. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  9. Josh Lerner & Jean Tirole, 2008. "Public Policy toward Patent Pools," NBER Chapters, in: Innovation Policy and the Economy, Volume 8, pages 157-186 National Bureau of Economic Research, Inc.
  10. repec:hrv:faseco:4589709 is not listed on IDEAS
  11. Jullien, Bruno, 2008. "Price Skewness and Competition in Multi-Sided Markets," IDEI Working Papers 504, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. Gaudeul, Alexandre & Jullien, Bruno, 2005. "E-Commerce, Two-Sided Markets and Info-Mediation," IDEI Working Papers 380, Institut d'Économie Industrielle (IDEI), Toulouse.
  13. 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.
  14. David Besanko & Jean-Pierre Dubé & Sachin Gupta, 2005. "Own-Brand and Cross-Brand Retail Pass-Through," Marketing Science, INFORMS, vol. 24(1), pages 123-137, July.
  15. Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347.
  16. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
  17. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  18. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
  19. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  20. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
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