Upward Pricing Pressure in Two-Sided Markets: Incorporating Rebalancing Effects

Andreea Cosnita-Langlais, Bjørn Olav Johansen and Lars Sørgard

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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)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-pay and nep-reg
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Published in International Journal of Industrial Organization, 2021, 74, ⟨10.1016/j.ijindorg.2020.102692⟩

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Related works:
Journal Article: Upward pricing pressure in two-sided markets: Incorporating rebalancing effects (2021)
Working Paper: Upward Price Pressure in Two-Sided Markets: Incorporating Feedback Effects (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03032755

DOI: 10.1016/j.ijindorg.2020.102692

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