Comparing Monopoly and Duopoly on a Two-Sided Market without Product Differentiation
We propose both a monopoly and a duopoly model of a two-sided market. Both settings are fully comparable, as we impose a homogeneous good produced at zero costs without capacity constraints, as well as identical parameterization of market sizes. We determine the duopoly equilibrium and the monopoly optimum in terms of the parameters and obtain solutions with and without subsidization (prices below marginal cost) of one market side. We show that there exists a continuum of economically plausible parameter sets for which duopoly equilibrium prices exceed optimal monopoly prices and one with no observable price effect of competition, i.e. one where optimum and equilibrium prices become equal. Despite the fact that virtually everything except for the number of platform operators is identical in the latter situations, total demand on both market sides in the duopoly market exceeds total demand in the monopoly market. Furthermore, even though there is no observable price effect, there is still a competitive effect in so far that total profits in the duopoly equilibrium are strictly smaller than monopoly profits. The relationship of total welfare is ambiguous in subsidization cases, while it is strictly greater in duopoly, if no subsidization takes place. Our results sharply contradict economic intuition and common economic knowledge from one-sided markets.
|Date of creation:||29 Jun 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Victor Ginsburgh & David Throsby, 2006.
"Handbook of the economics of art and culture,"
ULB Institutional Repository
2013/1673, ULB -- Universite Libre de Bruxelles.
- Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005.
"The Media and Advertising: A Tale of Two-Sided Markets,"
CEPR Discussion Papers
5223, C.E.P.R. Discussion Papers.
- Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, Elsevier.
- ANDERSON, Simon P. & GABSZEWICZ, Jean J., 2005. "The media and advertising : a tale of two-sided markets," CORE Discussion Papers 2005088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Simon P., ANDERSON & Jean J., GABSZEWICZ, 2005. "The media and advertising : a table of two-sided markets," Discussion Papers (ECON - Département des Sciences Economiques) 2005060, Université catholique de Louvain, Département des Sciences Economiques.
- Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 292-301, March.
- Chaudhri, Vivek, 1998. "Pricing and efficiency of a circulation industry: The case of newspapers," Information Economics and Policy, Elsevier, vol. 10(1), pages 59-76, March.
- Jean-Charles Rochet & Jean Triole, 2002.
"Platform competition in two sided markets,"
LSE Research Online Documents on Economics
24929, London School of Economics and Political Science, LSE Library.
- Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
- Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum 18/2001, Oslo University, Department of Economics.
- Jean Gabszewicz & Didier Laussel & Nathalie Sonnac, 1999.
"TV-Broadcasting Competition and Advertising,"
99-72, Centre de Recherche en Economie et Statistique.
- Jean-Charles Rochet & Jean Tirole, 2014.
"Platform Competition in Two-Sided Markets,"
Competition Policy International, vol. 10.
- Jonas Hackner & Sten Nyberg, 2008. "Advertising and Media Market Concentration," Journal of Media Economics, Taylor & Francis Journals, vol. 21(2), pages 79-96.
- Dewenter, Ralf, 2006. "Das Konzept der zweiseitigen Maerkte am Beispiel von Zeitungsmonopolen," Working Paper 53/2006, Helmut Schmidt University, Hamburg.
- Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 483-512.
- Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:23568. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.