Upward pricing pressure in two-sided markets: Incorporating rebalancing effects

Andreea Cosnita-Langlais, Bjørn Olav Johansen and Lars Sørgard

International Journal of Industrial Organization, 2021, vol. 74, issue C

Abstract: In two-sided markets it is important to consider rebalancing effects following a merger, i.e. the impact of a change in margin on one side of the market, either due to a price change or to efficiency gains, on the pricing incentives on the other side. We propose modified versions for the indices of pricing pressure (UPP and GUPPI) that take this into account. We show that in two-sided markets where the cross-group externalities are positive the upward pricing pressure will typically be overstated if the rebalancing effect is ignored. Our approach explains why competition agencies should look at both sides of the market when assessing platform mergers.

Keywords: Merger assessment; Two-sided markets; Upward Pricing Pressure (search for similar items in EconPapers)
JEL-codes: L13 L40 L82 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Upward Pricing Pressure in Two-Sided Markets: Incorporating Rebalancing Effects (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:74:y:2021:i:c:s0167718720301156

DOI: 10.1016/j.ijindorg.2020.102692

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