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Complementary platforms

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  • Patrick VAN CAYSEELE
  • Jo REYNAERTS

Abstract

We introduce an analytical framework close to the canonical model of platform competition investigated by Rochet and Tirole (2006) to study pricing decisions in two-sided markets when two or more platforms are needed simultaneously for the successful completion of a transaction. The model developed is a natural extension of the Cournot-Ellet theory of complementary monopoly featuring clear cut asymmetric single- and multihoming patterns across the market. The results indicate that the so-called anticommons problem generalizes to two-sided markets because individual platforms do not take into account the negative pricing externality they exert on the other platforms. As a result, mergers between such platforms may be welfare enhancing, but involve redistribution of surplus from one side of the market to the other. Moreover, the limit of an atomistic allocation of property rights however is not monopoly pricing, indicating that there also exist differences with the received theory of complementarity.

Suggested Citation

  • Patrick VAN CAYSEELE & Jo REYNAERTS, 2007. "Complementary platforms," Working Papers of Department of Economics, Leuven ces0721, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces0721
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    References listed on IDEAS

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    Cited by:

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    2. Van Cayseele, Patrick & Vanormelingen, Stijn, 2009. "Prices and Network Eects in Two-Sided Markets: the Belgian Newspaper Industry," Working Papers 2009/06, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    3. Yuyu Zeng & Harold Houba & Gerard van der Laan, 2015. "Note on ‘Competition in Two-sided Markets’," Tinbergen Institute Discussion Papers 15-080/II, Tinbergen Institute.
    4. Patrick van Cayseele & Christophe Wuyts, 2006. "Measuring Scale Economies in a Heterogeneous Industry: The Case of European Settlement Institutions," SUERF Studies, SUERF - The European Money and Finance Forum, number 2006/3 edited by Morten Balling, May.
    5. Jeon, Doh-Shin & Lefouili, Yassine & Li, Yaxin & Simcoe, Timothy, 2023. "Ecosystems and Complementary Platforms," TSE Working Papers 23-1468, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Two-Sided Markets · Complements · The Anticommons Problem;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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