On the Existence of Market-Sharing Equilibria in Two-Sided Hotelling Models

Emanuele Bacchiega (), Elias Carroni and Alessandro Fedele
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Emanuele Bacchiega: Department of Computer Science and Engineering, University of Bologna, Italy

No BEMPS106, BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen

Abstract: The Hotelling model is widely used to analyze platform competition in two-sided markets. In this setup, when platform differentiation is weak relative to cross-group benefits, tipping equilibria arise, where one platform monopolizes the market and the other is inactive. This paper shows that, alongside such equilibria, market-sharing equilibria of the kinked-demand type (Merel and Sexton 2010) exist. At these equilibria, platforms soften competition by replicating a collusive outcome. This finding extends the conventional understanding of the two-sided Hotelling model and offers insights for markets—particularly digital ones—where platforms operate in relatively low-differentiation environments.

Keywords: Hotelling model; Platform competition; Two-sided markets; Equilibrium existence. (search for similar items in EconPapers)
JEL-codes: C72 D21 L13 (search for similar items in EconPapers)
Pages: [9 pages]
Date: 2024-06
New Economics Papers: this item is included in nep-com, nep-gth, nep-mic and nep-pay
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