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Upward Pricing Pressure in Two-Sided Markets

  • Pauline Affeldt
  • Lapo Filistrucchi

    ()

    (Università degli Studi di Firenze,)

  • Tobias J. Klein

Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.

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Paper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Economics with number wp2012_15.rdf.

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Length: 29 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:frz:wpaper:wp2012_15.rdf
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  1. Lapo Filistrucchi & Tobias Klein & Thomas Michielsen, 2010. "Merger Simulation in a Two-Sided Market: The Case of the Dutch Daily Newspapers," Working Papers 10-15, NET Institute.
  2. Werden, Gregory J, 1996. "A Robust Test for Consumer Welfare Enhancing Mergers among Sellers of Differentiated Products," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 409-13, December.
  3. repec:cpi:atchrn:12.2.2011:i=6207 is not listed on IDEAS
  4. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
  5. Sonia Jaffe & E. Glen Weyl, 2013. "The First-Order Approach to Merger Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 188-218, November.
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