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Collusion in Two-Sided Markets

Author

Listed:
  • Yassine Lefouili

    (Toulouse School of Economics, university of Toulouse Capitole, Toulouse, France.)

  • Joana Pinho

    (Catolica Porto Business School and CEF.UP, Universidade do Porto, Porto, Portugal.)

Abstract

This paper explores the incentives for, and the effects of, collusion in prices between two-sided platforms. We characterize the most profitable sustainable agreement when platforms collude on both sides of the market and when they collude on a single side of the market. Under two-sided collusion, prices on both sides are higher than competitive prices, implying that agents on both sides become worse off as compared to the competitive outcome. An increase in cross-group externalities makes two-sided collusion at a given profit level harder to sustain, and reduces the harm from collusion suffered by the agents on a given side as long as the collusive price on that side is lower than the monopoly price. When platforms collude on a single side of the market, the price on the collusive side is lower (higher) than the competitive price if the magnitude of the cross-group externalities exerted on that side is sufficiently large (small). As a result, one-sided collusion may benefit the agents on the collusive side and harm the agents on the competitive side.

Suggested Citation

  • Yassine Lefouili & Joana Pinho, 2017. "Collusion in Two-Sided Markets," Working Papers 17-05, NET Institute.
    • Handle: RePEc:net:wpaper:1705
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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