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Competition in Multi-sided Markets: Divide and Conquer

Bruno Jullien ()

American Economic Journal: Microeconomics, 2011, vol. 3, issue 4, 186-220

Abstract: This paper studies Stackelberg price competition in a multi-sided market. The second-mover can engage in divide-and-conquer strategies, which involve cross-subsidies between sides. The paper recovers bounds on profits, and refines the results with a selection criteria whereby consumers resolve coordination failure in favor of a focal platform. It then analyzes perfect price discrimination with network effects, and two-sided market, shedding light on inefficiencies and strategic choices by platforms. A leading platform may refrain from selling to some side in order to soften competition, it tends to favor excessively balanced market shares and may prefer compatibility to reduce price competition. (JEL D43, D85)

JEL-codes: D43 D85 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mic.3.4.186
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Handle: RePEc:aea:aejmic:v:3:y:2011:i:4:p:186-220