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Horizontal mergers on platform markets: cost savings v. cross-group network effects?

Author

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  • Baranes, Edmond
  • Cortade, Thomas
  • Cosnita-Langlais, Andreea

Abstract

We study the impact of cost savings on the outcome of horizontal mergers between two-sided platforms. We consider four symmetrically differentiated platforms located equidistantly on the unit circle and competing in membership fees. Users on both sides single-home, and we allow for both positive and negative cross-group externalities. We find that the impact of merger cost savings on prices is generally not monotonic, and that synergies are necessary for horizontal platform mergers to be Pareto-improving. Furthermore, the merger may benefit users on one side while harming users on the opposite side, which raises some interesting questions for the enforcement of merger control on two-sided markets.

Suggested Citation

  • Baranes, Edmond & Cortade, Thomas & Cosnita-Langlais, Andreea, 2019. "Horizontal mergers on platform markets: cost savings v. cross-group network effects?," MPRA Paper 97459, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:97459
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    References listed on IDEAS

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    Cited by:

    1. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    2. Tremblay, Mark J. & Adachi, Takanori & Sato, Susumu, 2023. "Cournot platform competition with mixed-homing," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    3. Takanori Adachi & Susumu Sato & Mark J. Tremblay, 2023. "Platform Oligopoly with Endogenous Homing: Implications for Mergers and Free Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 71(4), pages 1203-1232, December.

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    More about this item

    Keywords

    horizontal merger; two-sided markets; cost savings; indirect network effects; merger control;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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