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Negative intra-group externalities in two-sided markets

  • BELLEFLAMME, Paul
  • TOULEMONDE, Eric

Two types of agents interact on a pre-existing free platform. Agents value positively the presence of agents of the other type but may value negatively the presence of agents of their own type. We ask whether a new platform can find fees and subsidies so as to divert agents from the existing platform and make a profit. We show that this might be impossible if intra-group negative externalities are sufficiently (but not too) strong with respect to positive inter-group externalities.

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File URL: http://dx.doi.org/10.1111/j.1468-2354.2008.00529.x
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2119.

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Handle: RePEc:cor:louvrp:-2119
Note: In : International Economic Review, 50(1), 245-272, 2009
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  1. Genicot, Garance & Ray, Debraj, 2006. "Contracts and externalities: How things fall apart," Journal of Economic Theory, Elsevier, vol. 131(1), pages 71-100, November.
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  19. Jorge A, Ferrando & Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Two-Sided Network Effects and Competition : An Application to Media Industries," Working Papers 2004-09, Centre de Recherche en Economie et Statistique.
  20. Bruno Jullien, 2004. "Two-Sided Markets and Electronic Intermediaries," CESifo Working Paper Series 1345, CESifo Group Munich.
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