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Unique Equilibrium in Two-Part Tariff Competition between Two-Sided Platforms

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Listed author(s):
  • Reisinger, Markus
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    Abstract

    Two-sided market models in which platforms compete via two-part tariffs, i.e. a subscription and a per-transaction fee, are often plagued by a continuum of equilibria. This paper augments existing models by allowing for heterogeneous rading behavior of agents on both sides. We show that this simple method yields a unique equilibrium even in the limit as the heterogeneity vanishes. In case of competitive bottlenecks we find that in this equilibrium platforms benefit from the possibility to price discriminate if per-transaction costs are relatively large. This is the case because two-part tariffs allow platforms to better distribute these costs among the two sides. Under two-sided single-homing price discrimination hurts platforms if per-transaction fees can be negative.

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    File URL: https://epub.ub.uni-muenchen.de/13246/1/308.pdf
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    Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 308.

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    Date of creation: Feb 2010
    Handle: RePEc:trf:wpaper:308
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    Keywords: Two-Sided Markets; Per-Transaction Fee; Subscription Fee; Two-Part;

    Find related papers by JEL classification:

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

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    Cited by:

    1. Böhme, Enrico, 2012. "Second-Degree Price Discrimination on Two-Sided Markets," MPRA Paper 40951, University Library of Munich, Germany.

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