Sufficient Decisions in Multiâ€ Sided and Multiproduct Markets
Alexei Alexandrov and
Daniel Spulber ()
Journal of Industrial Economics, 2017, vol. 65, issue 4, 739-766
We show that in many models where firms make multiple decisions, analysis can be made more tractable by reâ€ formulating the model into one in which each firm makes a single choice, which we call a sufficient decision. The transformation allows application of standard techniques in these settings, including passâ€ through for tax incidence and upward pricing pressure for merger analysis. The transformation works because the assumption of profit maximization links the firmsâ€™ decisions together. Examples include models of monopoly and oligopoly in twoâ€ sided markets, where a natural sufficient decision may be the number of transactions that the firm facilitates, and multiproduct markets.
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