Business Intelligence

Price-Increasing Competition On Two-Sided Markets With Homogeneous Platforms

Free registration required

Executive Summary

The authors propose both a monopoly and a duopoly model of a two-sided market. Both settings are fully comparable, as they impose a homogeneous good produced at zero costs without capacity constraints, as well as identical parameterization of market sizes. They determine the duopoly equilibrium and the monopoly optimum in terms of the parameters and obtain solutions with and without subsidization (prices below marginal cost) of one market side. They show that there exists a continuum of economically plausible parameter sets for which duopoly equilibrium prices exceed optimal monopoly prices and one with no observable price effect of competition, i.e. one where optimum and equilibrium prices become equal.

  • Format: PDF
  • Size: 337.9 KB