IDEAS home Printed from https://ideas.repec.org/p/lmu/muenec/478.html
   My bibliography  Save this paper

Two-Sided Markets with Negative Externalities

Author

Listed:
  • Reisinger, Markus

Abstract

This paper analyses a two-sided market in which two platforms compete against each other. One side, the advertisers, exerts a negative externality on the ther side, the users. It is shown that if platforms can charge advertisers only, a higher degree of competition for users can lead to higher profits because competition on the advertisers' side is reduced. If platforms can charge users as well, profits might increase or decrease, the latter because of increased competition through the additional instrument of the user fee. Nevertheless the equilibrium with user fee is more efficient.

Suggested Citation

  • Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:478
    as

    Download full text from publisher

    File URL: https://epub.ub.uni-muenchen.de/478/1/munichtwsi.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Anderson, Simon P. & Leruth, Luc, 1993. "Why firms may prefer not to price discriminate via mixed bundling," International Journal of Industrial Organization, Elsevier, vol. 11(1), pages 49-61, March.
    2. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    3. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    4. Esther Gal-Or & Anthony Dukes, 2006. "On the Profitability of Media Mergers," The Journal of Business, University of Chicago Press, vol. 79(2), pages 489-526, March.
    5. Jonathan H. Hamilton & W. Bentley MacLeod & Jacques-François Thisse, 1991. "Spatial Competition and the Core," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 925-937.
    6. 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, Center for Research in Economics and Statistics.
    7. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    8. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
    9. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    10. Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2005. "Advertising on TV: Under- or Overprovision?," Memorandum 15/2005, Oslo University, Department of Economics.
    11. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
    12. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
    13. Anthony Dukes & Esther Gal–Or, 2003. "Negotiations and Exclusivity Contracts for Advertising," Marketing Science, INFORMS, vol. 22(2), pages 222-245, November.
    14. 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.
    15. Barros Pedro P & Kind Hans Jarle & Nilssen Tore & Sørgard Lars, 2005. "Media Competition on the Internet," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-20, January.
    16. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alexander Matros & Andriy Zapechelnyuk, 2008. "Optimal fees in internet auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 12(3), pages 155-163, September.
    2. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers in Economics 963, University of Munich, Department of Economics.
    3. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2005. "Advertising, Competition and Entry in Media Industries," CESifo Working Paper Series 1591, CESifo Group Munich.
    4. Matros, Alexander & Zapechelnyuk, Andriy, 2011. "Optimal mechanisms for an auction mediator," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 426-431, July.
    5. Junseok Hwang & Dongook Choi & Jongeun Oh & Yeonbae Kim, 2009. "Competition in the Korean Internet Portal Market: Network Effects, Profit, and Market Efficiency," TEMEP Discussion Papers 200925, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.
    6. Martin Bandulet, 2005. "On the Efficiency of Spam Mailing and Portal Advertising," Discussion Paper Series 275, Universitaet Augsburg, Institute for Economics.
    7. repec:pit:wpaper:202 is not listed on IDEAS
    8. Richard Schmidtke, 2006. "Two–Sided Markets with Pecuniary and Participation Externalities," Working Papers 003, Bavarian Graduate Program in Economics (BGPE).
    9. Fiedler, Ingo C, 2010. "Antitrust in two-sided markets: Is competition always desirable?," Berkeley Olin Program in Law & Economics, Working Paper Series qt5dp3q033, Berkeley Olin Program in Law & Economics.
    10. Ramon Casadesus-Masanell & Feng Zhu, 2009. "Strategies to Fight Ad-sponsored Rivals," Working Papers 09-09, NET Institute, revised Sep 2009.
    11. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    12. Richard Schmidtke, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," CESifo Working Paper Series 1776, CESifo Group Munich.
    13. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 133, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    14. Germa Bel & Laia Domenech, 2009. "What Influences Advertising Price in Television Channels?: An Empirical Analysis on the Spanish Market," Journal of Media Economics, Taylor & Francis Journals, vol. 22(3), pages 164-183.

    More about this item

    Keywords

    Negative Externalities ; Price Competition ; Two-Sided Markets;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lmu:muenec:478. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.