Competition and Collusion in Two-Sided Markets with an Outside Option

Cristian Chica, Yinglong Guo and Gilad Lerman

Papers from arXiv.org

Abstract: We introduce pricing formulas for competition and collusion models of two-sided markets with an outside option. For the competition model, we find conditions under which prices and consumer surplus may increase or decrease if the outside option utility increases. Therefore, neglecting the outside option can lead to either overestimation or underestimation of these equilibrium outputs. Comparing collusion to competition, we find that in cases of small cross-side externalities, collusion results in decreased normalized net deterministic utilities, reduced market participation and increased price, on both sides of the market. Additionally, we observe that as the number of platforms increases in the competition model, market participation rises. Profits, however, decrease when the net normalized deterministic utility is sufficiently low but increase when it is high. Furthermore, we identify specific conditions that quantify the change of price and consumer surplus when the competition increases.

Date: 2025-05
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2505.06109 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2505.06109

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().