Negative Network Externalities In Two-Sided Markets: A Competition Approach
Source: Munich Personal Repec Archive
Consider a firm advertising in a job matching agency with the aim of employing the most qualified workers. Its chances of success would be higher for a smaller number of competitor firms advertising in the same job matching agency, i.e. careerbuilder.com. How would the resulting competitive behavior among the firms which are advertising to this job matching agency affect the agency's optimal pricing behavior? The author analyzes the optimal market structures and pricing strategies of a monopolist platform in a two-sided market setup in which the agents on each side prefer the platform to be less competitive on their side; that is, a market with negative intra-group network externalities.