Industrial Organization of Markets with Two-Sided Platforms PDF Download

Author: Richard Schmalensee
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
Many diverse industries are populated by businesses that operate two-sided platforms. These businesses serve distinct groups of customers who need each other in some way, and the core business of the two-sided platform is to provide a common (real or virtual) meeting place and to facilitate interactions between members of the two distinct customer groups. Platforms play an important role throughout the economy by minimizing transactions costs between entities that can benefit from getting together. In these businesses, pricing and other strategies are strongly affected by the indirect network effects between the two sides of the platform. As a matter of theory, for example, profit-maximizing prices may entail below-cost pricing to one set of customers over the long run and, as a matter of fact, many two-sided platforms charge one side prices that are below marginal cost and are in some cases negative. These and other aspects of two-sided platforms affect almost all aspects of antitrust analysis - from market definition, to the analysis of cartels, single-firm conduct, and efficiencies. This paper provides a brief introduction to the economics of two-sided platforms and the implications for antitrust analysis.

Author: David Sparks Evans
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 36

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Book Description
"Two-sided platforms (2SPs) cater to two or more distinct groups of customers, facilitating value-creating interactions between them. The village market and the village matchmaker were 2SPs; eBay and Match.com are more recent examples. Other examples include payment card systems, magazines, shopping malls, and personal computer operating systems. Building on the seminal work of Rochet and Tirole (2003), a rapidly growing literature has illuminated the economic principles that apply to 2SPs generally. One key result is that 2SPs may find it profit-maximizing to charge prices for one customer group that are below marginal cost or even negative, and such skewed pricing pattern is prevalent, although not universal, in industries that appear to be based on 2SPs. Over the years, courts have also recognized that certain industries, notably payment card systems and newspapers, now understood to be based on 2SPs, are governed by unusual economic relationships. This chapter provides an introduction to the economics of 2SPs and its application to several competition policy issues"--National Bureau of Economic Research web site.

Author: Janusz A. Ordover
Publisher:
ISBN:
Category :
Languages : en
Pages : 10

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Book Description
A freshman student in economics or a Nobel prize-winning macroeconomist who has lately stumbled across a journal or two in industrial organization economics may be somewhat perplexed or confused by many references to two-sided markets. Surely, is it not the case that all markets have two sides, namely buyers and sellers? Consequently, to the uninitiated, the concept of a two-sided market offers little, if any, additional analytical insight. Some of that confusion is perhaps dispelled by a more informative description, namely: markets with two-sided platforms. So for the rest of this paper, we shall forget about two-sided markets and speak of two-sided platforms (2SP) and of markets in which these 2SPs compete. Professors David Evans and Richard Schmalensee (hereinafter Eamp;S), who have done more than most of the thinking about the economics of 2SPs and advocating the importance of the idea to other academics, lawyers, policymakers, and business people, offer a highly accessible survey of the state of play in their excellent contribution to this volume.It is important to recognize that, perhaps without knowing so, economists have studied 2SPs for quite some time (i.e., way before the term was invented) as have competition authorities and the courts. And, of course, business people, who generally are ahead of theoreticians in such matters, have also intuitively understood the specific pricing and marketing challenges that have to be solved in order to launch a 2SP and make it prosper. These challenges arise because (by definition) a 2SP links two (or more) distinct groups of consumers whose demands are interrelated in that each group confers (perhaps up to a point) a positive external benefit on the other. These effects are generally referred to as indirect network effects, in distinction to more standard network effects that realize themselves among the same customer group. When there are indirect network effects, a business strategy that stimulates demand on side A of the platform will, when properly implemented, stimulate demand on side B of the platform, which in turn creates a positive feedback to side A, and so on. Because of this interdependence, a 2SP entrepreneur must solve two problems: first, how to get both sides on board and second, how to structure prices to the two sides.

Author: Paul Belleflamme
Publisher: Cambridge University Press
ISBN: 1139485245
Category : Business & Economics
Languages : en
Pages : 725

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Book Description
Industrial Organization: Markets and Strategies provides an up-to-date account of modern industrial organization that blends theory with real-world applications. Written in a clear and accessible style, it acquaints the reader with the most important models for understanding strategies chosen by firms with market power and shows how such firms adapt to different market environments. It covers a wide range of topics including recent developments on product bundling, branding strategies, restrictions in vertical supply relationships, intellectual property protection, and two-sided markets, to name just a few. Models are presented in detail and the main results are summarized as lessons. Formal theory is complemented throughout by real-world cases that show students how it applies to actual organizational settings. The book is accompanied by a website containing a number of additional resources for lecturers and students, including exercises, answers to review questions, case material and slides.

Author: Paul Belleflamme
Publisher: Cambridge University Press
ISBN: 1108625622
Category : Business & Economics
Languages : en
Pages : 275

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Book Description
Digital platforms controlled by Alibaba, Alphabet, Amazon, Facebook, Netflix, Tencent and Uber have transformed not only the ways we do business, but also the very nature of people's everyday lives. It is of vital importance that we understand the economic principles governing how these platforms operate. This book explains the driving forces behind any platform business with a focus on network effects. The authors use short case studies and real-world applications to explain key concepts such as how platforms manage network effects and which price and non-price strategies they choose. This self-contained text is the first to offer a systematic and formalized account of what platforms are and how they operate, concisely incorporating path-breaking insights in economics over the last twenty years.

Author: Kate Ho
Publisher: Elsevier
ISBN: 0323988873
Category : Business & Economics
Languages : en
Pages : 782

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Book Description
Handbook of Industrial Organization Volume 4 highlights new advances in the field, with this new volume presenting interesting chapters. Each chapter is written by an international board of authors. Part of the renowned Handbooks in Economics series Chapters are contributed by some of the leading experts in their fields A source, reference and teaching supplement for industrial organizations or industrial economists

Author: David Sparks Evans
Publisher:
ISBN: 9781950769414
Category : Law
Languages : en
Pages : 210

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Book Description
This book compiles a set of pieces on the implications of the U.S. Supreme Court's ruling in Ohio et. al. v. American Express and the preceding litigation for the treatment of multisided platforms under U.S. antitrust law. The authors consider that the Supreme Court ruling provides valuable guidance for antitrust analysis in such markets.

Author: David S. Evans
Publisher:
ISBN:
Category :
Languages : en
Pages : 27

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Book Description
Two-sided platform businesses serve distinct groups of customers and need each other in some way. They provide these customers a real or virtual meeting place, and they facilitate the interactions between members of these customer groups. They essentially act as intermediaries between the two groups and create efficiencies by lowering transactions costs and reducing duplication costs. Many significant industries are populated by businesses based on two-sided platforms. These include many traditional businesses, such as shopping malls, and most Internet-based businesses, such as social networks. Several economic conclusions that are relevant for antitrust analysis follow from the fact that these platforms are maximizing profits based on interlinked demand from the two sides. Prices on one side may be below marginal cost and possibly negative in long-run equilibrium. Many two-sided platforms in practice subsidize one side and earn profits on the other. Moreover, the standard result that the percent markup of price over marginal cost is inversely related to the elasticity of demand does not hold for either customer group. Antitrust analysis, tools, and techniques require modification when two-sided platforms account for a significant portion of supply. Failure to account for the consequences of interlinked demand between the two sides can lead antitrust analysis into serious error.

Author: Martin Peitz
Publisher:
ISBN:
Category : Game theory
Languages : en
Pages : 0

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Book Description
We study optimal experimentation by a monopolistic platform in a two-sided market framework. The platform provider faces uncertainty about the strength of the externality each side is exerting on the other. It maximizes the expected present value of its profi t stream in a continuous-time infi nite-horizon framework by setting participation fees or quantities on both sides. We show that a price-setting platform provider sets a fee lower than the myopically optimal level on at least one side of the market, and on both sides if the two externalities are of approximately equal strength. If the externality that one side exerts is suffi ciently weaker than the externality it experiences, the optimal fee on this side exceeds the myopically optimal level. We obtain analogous results for expected prices when the platform provider chooses quantities. While the optimal policy does not admit closed-form representations in general, we identify special cases in which the undiscounted limit of the model can be solved in closed form.

Author: Richard Schmalensee
Publisher: North Holland
ISBN:
Category : Business & Economics
Languages : en
Pages : 1002

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Book Description
Determinants of firm and market organization; Analysis of market behavior; Empirical methods and results; International issues and comparision; government intervention in the Marketplace.