Two–Sided Markets with Pecuniary and Participation Externalities

Richard Schmidtke

No 3, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: The existing literature on "two-sided markets" addresses partici- pation externalities, but so far it has neglected pecuniary externalities between competing platforms. In this paper we build a model that incorporates both externalities. In our setup di®erentiated platforms compete in advertising and o®er consumers a service free of charge (such as a TV program) that is ¯nanced through advertising. We show that advertising can exhibit the properties of a strategic substitute or complement. Surprisingly, there exist cases in which platforms bene¯t from market entry. Moreover, we show that from a welfare point of view perfect competition is not always desirable.

Keywords: two-sided markets; broadcasting; advertising; market entry; digi- tal television (search for similar items in EconPapers)
JEL-codes: D43 L13 L82 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2006-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.bgpe.de/files/2024/05/003_Schmidtke.pdf First version, 2006 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bav:wpaper:003_schmidtke

Access Statistics for this paper

More papers in Working Papers from Bavarian Graduate Program in Economics (BGPE) Contact information at EDIRC.
Bibliographic data for series maintained by Anton Barabasch ().