Competition in Two-Sided Markets

Mark Armstrong ()

Industrial Organization from EconWPA

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.

Keywords: Two-sided markets; network externalities; supermarkets; advertising (search for similar items in EconPapers)
JEL-codes: L (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mic and nep-net
Date: 2005-05-25
Note: Type of Document - pdf; pages: 32
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Related works:
Journal Article: Competition in Two-Sided Markets (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0505009

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