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Resale Price Maintenance In Two‐Sided Markets

Tommy Gabrielsen (), Bjørn Olav Johansen and Teis Lunde Lømo

Journal of Industrial Economics, 2018, vol. 66, issue 3, 570-609

Abstract: We consider competing two‐sided platforms selling directly to one side of the market, and through an agent to the other side. Platforms offer nonlinear tariffs, and can choose whether to contract with the same or different agents. We study the platforms’ incentives to impose resale price maintenance (RPM), and the effect on end customers. We find that, even if customers on both sides value each other's participation, platforms impose minimum RPM to raise prices on both sides simultaneously if platform competition is sufficiently strong. In a linear demand example, we find that overall welfare decreases with minimum prices and increases with maximum prices.

Date: 2018
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Working Paper: Resale price maintenance in two-sided markets (2015) Downloads
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Handle: RePEc:bla:jindec:v:66:y:2018:i:3:p:570-609