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Upward Pricing Pressure in Two-Sided Markets

Pauline Affeldt, Lapo Filistrucchi () and Tobias Klein ()

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.

Keywords: Merger evaluation; two-sided markets; network effects; UPP. (search for similar items in EconPapers)
JEL-codes: L13 L40 L82 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012
New Economics Papers: this item is included in nep-com, nep-ind, nep-mkt and nep-net
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Related works:
Journal Article: Upward Pricing Pressure in Two‐sided Markets (2013) Downloads
Working Paper: Upward Pricing Pressure in Two-Sided Markets (2012) Downloads
Working Paper: Upward Pricing Pressure in Two-Sided Markets (2012) Downloads
Working Paper: Upward Pricing Pressure in Two-Sided Markets (2012) Downloads
Working Paper: Upward Pricing Pressure in Two-Sided Markets (2012) Downloads
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