Segmentation versus Agglomeration: Competition between Platforms with Competitive Sellers

Martin Peitz, Markus Reisinger and Heiko Karle

No 12435, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: For many products, platforms enable sellers to transact with buyers. We show that the competitive conditions among sellers shape the market structure in platform industries. If product market competition is tough, sellers avoid competitors by joining different platforms. This allows platforms to sustain high fees and explains why, for example, in some online markets, several homogeneous platforms segment the market. Instead, if product market competition is soft, agglomeration on a single platform emerges, and platforms fi ght for the dominant position. These insights give rise to novel predictions. For instance, market concentration and fees are negatively correlated in platform industries, which inverts the standard logic of competition.

Keywords: Intermediation; Two-sided markets; Market structure; Price competition; Endogenous segmentation (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2017-11
New Economics Papers: this item is included in nep-com, nep-mic, nep-mkt, nep-pay and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Segmentation Versus Agglomeration: Competition Between Platforms With Competitive Sellers (2019)
Working Paper: Segmentation versus agglomeration: competition between platforms with competitive sellers (2017)
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