Monopolies in Two-Sided Markets: Comparative Statics and Identification

Eric Weyl ()

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: Many models of monopoly in two-sided markets have been proposed (Rochet and Tirole, 2006), but little is known about them. I provide a full set of comparative statics for three models, one that generalizes that of Rochet and Tirole (2003), a second that generalizes Armstrong (2006) and a third that fuses the two models. This answers a number of questions central to the theoretical literature, such as the effects of market power and price controls and the relationship between different models. I also show how, given exogenous cost variations, these models can be almost fully (locally) identified (e.g. market power and predatory pricing), tested and distinguished from one another. I highlight applications of the results to a wide variety of theoretical, empirical and policy questions, including merger analysis.

Date: 2008-10-31
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