Multimarket Contact, Cross-Market Externalities and Platform Competition

Eric Darmon, Thomas Le Texier, Zhiwen Li and Thierry Pénard

No 2025-22, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: Antitrust authorities are concerned with the dominant market position of Tech Giants such as Google, Meta, or Amazon. These digital conglomerates are characterized by platform-based business models and multimarket contact (MMC). In traditional one-sided markets, theory and empirical evidence show that MMC tends to relax competition. In this paper, we revisit this result in the context of platform competition with competitive bottleneck and cross-market externalities, and provide new insights into the impact of MMC on platform competition. In this context, when platforms charge the two groups of users (bilateral pricing), we find that MMC always decreases the profitability of platforms regardless of the nature and magnitude of cross-market externalities. Then we consider the case in which platforms can only charge one group of users (unilateral pricing). When platforms charge the side on which they are not directly competing for users (i.e. the side that is not the competitive bottleneck), MMC may relax competition only if cross-group externalities and cross-market externalities are both sufficiently small. From a competition policy perspective, our paper provides insights into how antitrust authorities should review conglomerate mergers in digital markets and assesses the effects of the diversification strategies of digital platforms in the context of cross-market externalities and competitive bottleneck.

Keywords: two-sided markets; platform competition; digital markets; multimarket contact; cross-market externalities; competitive bottleneck; competition policy (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 L86 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2025
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic, nep-pay and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2025-22

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