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Collusion in Two-Sided Markets

Yassine Lefouili () and Joana Pinho
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Yassine Lefouili: Toulouse School of Economics, university of Toulouse Capitole, Toulouse, France.

No 17-05, Working Papers from NET Institute

Abstract: This paper explores the incentives for, and the effects of, collusion in prices between two-sided platforms. We characterize the most profitable sustainable agreement when platforms collude on both sides of the market and when they collude on a single side of the market. Under two-sided collusion, prices on both sides are higher than competitive prices, implying that agents on both sides become worse off as compared to the competitive outcome. An increase in cross-group externalities makes two-sided collusion at a given profit level harder to sustain, and reduces the harm from collusion suffered by the agents on a given side as long as the collusive price on that side is lower than the monopoly price. When platforms collude on a single side of the market, the price on the collusive side is lower (higher) than the competitive price if the magnitude of the cross-group externalities exerted on that side is sufficiently large (small). As a result, one-sided collusion may benefit the agents on the collusive side and harm the agents on the competitive side.

Keywords: collusion; two-sided markets; cross-group externalities. (search for similar items in EconPapers)
JEL-codes: D43 L41 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2017-09
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-law and nep-mic
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Working Paper: Collusion in Two-Sided Markets (2020) Downloads
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