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Areeda–Turner in Two-Sided Markets

Stefan Behringer and Lapo Filistrucchi ()

Review of Industrial Organization, 2015, vol. 46, issue 3, 287-306

Abstract: We extend the Areeda–Turner rule to two-sided markets. We show that a two-sided monopolist may find it short-run profit-maximizing to charge a price below marginal cost on one side of the market. Hence showing that the price is below marginal cost on one side of a two-sided market cannot be considered a sign of predation. We then argue for a two-sided Areeda–Turner rule that takes into account price-cost margins on both sides of the market. Two examples highlight that applying a one-sided Areeda–Turner rule may lead one to assess legitimate prices as predatory or to consider predatory prices as legitimate. Copyright The Author(s) 2015

Keywords: Daily newspapers; Market definition; Network effects; Predation; Two-sided markets; L12; L41; L82 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Areeda-Turner in Two-Sided Markets (2014) Downloads
Working Paper: Areeda-Turner in Two-Sided Markets (2014) Downloads
Working Paper: Areeda-Turner in Two-Sided Markets (2014) Downloads
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DOI: 10.1007/s11151-015-9460-5

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