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Tipping in Two-Sided Markets with Asymmetric Platforms

Author

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  • Alex Gold

    (Bipartisan Policy Center)

  • Christiaan Hogendorn

    () (Economics Department, Wesleyan University)

Abstract

This paper examines tipping in the Armstrong (2006) two-sided market model. By adding simple cost asymmetries to the original model, we show that the model is quite robust to di erences in network size and deviations from 50-50 market share. It well represents situations where asymmetries compensate for one another; for example, one platform might incur marginal costs to court developers and make up for it with lower costs to users. Our tests also make clear that there is an implicit stand-alone utility in the Armstrong model even when it is not specifically modeled. These results improve interpretation of the many studies that use the Armstrong model for policy analysis.

Suggested Citation

  • Alex Gold & Christiaan Hogendorn, 2015. "Tipping in Two-Sided Markets with Asymmetric Platforms," Wesleyan Economics Working Papers 2015-001, Wesleyan University, Department of Economics.
  • Handle: RePEc:wes:weswpa:2015-001
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    File URL: http://repec.wesleyan.edu/pdf/chogendorn/2015001_hogendorn.pdf
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    References listed on IDEAS

    as
    1. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
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    8. Jay Pil Choi, 2010. "TYING IN TWO-SIDED MARKETS WITH MULTI-HOMING -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 607-626, September.
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    13. Andrei Hagiu, 2009. "Two-Sided Platforms: Product Variety and Pricing Structures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1011-1043, December.
    14. Hildebrand, Thomas, 2012. "Estimating network effects in two-sided markets without data on prices and quantities," Economics Letters, Elsevier, vol. 117(3), pages 585-588.
    15. Evans David S. & Schmalensee Richard, 2010. "Failure to Launch: Critical Mass in Platform Businesses," Review of Network Economics, De Gruyter, vol. 9(4), pages 1-28, December.
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    1. repec:gam:jsusta:v:10:y:2018:i:4:p:1053-:d:139245 is not listed on IDEAS
    2. repec:eee:iepoli:v:40:y:2017:i:c:p:1-12 is not listed on IDEAS

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