Two-Sided Markets with Negative Externalities

Markus Reisinger

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: This paper analyses a two-sided market in which two platforms compete against each other. One side, the advertisers, exerts a negative externality on the ther side, the users. It is shown that if platforms can charge advertisers only, a higher degree of competition for users can lead to higher profits because competition on the advertisers' side is reduced. If platforms can charge users as well, profits might increase or decrease, the latter because of increased competition through the additional instrument of the user fee. Nevertheless the equilibrium with user fee is more efficient.

Keywords: Negative Externalities; Price Competition; Two-Sided Markets (search for similar items in EconPapers)
JEL-codes: D43 D62 L13 (search for similar items in EconPapers)
Date: 2004-12
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:478

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