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Competition in Two-Sided Markets

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  • Mark Armstrong

    (University College London)

Abstract

There are many examples of markets involving two groups of agents who need to interact via 'platforms', and where one group's benefit from joining a platform depends on the number of agents from the other group who join the same platform. This paper presents theoretical models for three variants of such markets: a monopoly platform; a model of competing platforms where each agent must choose to join a single platform; and a model of 'competing bottlenecks', where one group wishes to join all platforms. The main determinants of equilibrium prices are (i) the relative sizes of the cross-group externalities, (ii) whether fees are levied on a lump-sum or per-transaction basis, and (iii) whether a group joins just one platform or joins all platforms.

Suggested Citation

  • Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0505009
    Note: Type of Document - pdf; pages: 32
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    References listed on IDEAS

    as
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    8. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 353-380, August.
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    More about this item

    Keywords

    Two-sided markets; network externalities; supermarkets; advertising;
    All these keywords.

    JEL classification:

    • L - Industrial Organization

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    1. Mercato a due parti in Wikipedia Italian
    2. Two-sided market in Wikipedia English

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