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Platform Competition in Two-Sided Markets

  • Rochet, Jean-Charles
  • Tirole, Jean

Many if not most markets with network externalities are two-sided. To succeed, platforms in industries such as software, portals and media, payment systems and the Internet, must "get both sides of the market on board ". Accordingly, platforms devote much attention to their business model, that is to how they court each side while making money overall. The paper builds a model of platform competition with two-sided markets. It unveils the determinants of price allocation and enduser surplus for different governance structures (profit-maximizing platforms and not-for-profit joint undertakings), and compares the outcomes with those under an integrated monopolist and a Ramsey planner.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 152.

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Date of creation: 2003
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Publication status: Published in Journal of the European Economic Association, vol.�1, n°4, juin 2003, p.�990-1029.
Handle: RePEc:ide:wpaper:654
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  1. Jerry A. Hausman & Gregory K. Leonard & Jean Tirole, 2003. "On Non-Exclusive Membership in Competing Joint Ventures," Levine's Working Paper Archive 506439000000000145, David K. Levine.
  2. Jullien, Bruno, 2001. "Competing with Network Externalities and Price Discrimination," CEPR Discussion Papers 2883, C.E.P.R. Discussion Papers.
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  13. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  14. Marc Rysman, 2004. "Competition Between Networks: A�Study of the Market for Yellow�Pages," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 483-512, 04.
  15. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
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  17. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
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