Competition in Two-Sided Markets ¤
TL;DR: In this article, the authors survey recent theoretical work on two-sided markets and the main questions are (i) what determines which side of the market is subsidized (if either) in order to attract the other side, and (ii) is the resulting outcome socially e¢cient?
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Abstract: There are many examples of markets involving two groups of participants who need to interact via intermediaries. Moreover, these intermediaries usually have to compete for business from both groups. Examples include academic publishing (where journals facilitate the interaction between authors and readers), advertising in media markets (where newspapers or TV channels enable adverts from producers to reach consumers), payment systems (where credit cards can be a convenient method of transaction between consumers and retailers), and telecommunications networks (where networks are used to provide links between callers and those who receive calls). The paper surveys recent theoretical work on these two-sided markets. The main questions are (i) what determines which side of the market is subsidized (if either) in order to attract the other side, and (ii) is the resulting outcome socially e¢cient?
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References
Platform competition in two‐sided markets
Jean-Charles Rochet,Jean Tirole +1 more
TL;DR: In this paper, the authors build a model of platform competition with two-sided markets and reveal the determinants of price allocation and end-user surplus for different governance structures (profit-maximizing platforms and not-for-profit joint undertakings), and compare the outcomes with those under an integrated monopolist and a Ramsey planner.
Two-sided markets: a progress report
Jean-Charles Rochet,Jean Tirole +1 more
TL;DR: In this paper, the authors provide a road map to the burgeoning literature on two-sided markets and present new results on the mix of membership and usage charges when price setting or bargaining determine payments between end-users.
Chicken and egg: competition among intermediation service providers
Bernard Caillaud,Bruno Jullien +1 more
TL;DR: In this paper, the authors analyze a model of imperfect price competition between intermediation service providers, and analyze in detail the pricing and business strategies followed by intermediation services providers, showing that efficient market structures emerge in equilibrium, as well as some specific form of inefficient structures.
Supply function equilibria in oligopoly under uncertainty
Paul Klemperer,Margaret A. Meyer +1 more
TL;DR: In this paper, the authors model an oligopoly facing uncertain demand in which each firm chooses as its strategy a "supply function" relating its quantity to its price, and prove the existence of a Nash equilibrium in supply functions for a symmetric oligopoly producing a homogeneous good.
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Two-Sided Markets, Competitive Bottlenecks, and Exclusive Contracts
Mark Armstrong,Julian Wright +1 more
TL;DR: In this article, the authors provide a framework for analyzing two-sided markets that allows for different degrees of product differentiation on each side of the market and show that competitive bottlenecks arise endogenously.