Complementary platforms

Patrick Van Cayseele and Jo Reynaerts

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: We introduce an analytical framework close to the canonical model of platform competition investigated by Rochet and Tirole (2006) to study pricing decisions in two-sided markets when two or more platforms are needed simultaneously for the successful completion of a transaction. The model developed is a natural extension of the Cournot-Ellet theory of complementary monopoly featuring clear cut asymmetric single- and multihoming patterns across the market. The results indicate that the so-called anticommons problem generalizes to two-sided markets because individual platforms do not take into account the negative pricing externality they exert on the other platforms. As a result, mergers between such platforms may be welfare enhancing, but involve redistribution of surplus from one side of the market to the other. Moreover, the limit of an atomistic allocation of property rights however is not monopoly pricing, indicating that there also exist differences with the received theory of complementarity.

Keywords: Two-Sided; Markets; ·; Complements; ·; The; Anticommons; Problem (search for similar items in EconPapers)
JEL-codes: D43 D62 K11 L13 L4 L5 (search for similar items in EconPapers)
Date: 2007-07
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Journal Article: Complementary Platforms (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0721

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