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Transaction Versus Non-Transaction Platforms: A False Dichotomy In Two-Sided Market Definition

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  • Gunnar Niels

Abstract

When it comes to market definition in two-sided markets, an idea that has gained traction—among academics, competition authorities and even the US Supreme Court—is the distinction between transaction and non-transaction platforms. However, this distinction has no theoretical underpinning in the context of the hypothetical monopolist test (HMT). The hypothetical monopolist sets profit-maximising prices on both sides, as a function of own-price elasticities and externalities between the sides, regardless of whether the platform is transaction or non-transaction. I address the various theoretical and practical arguments put forward in support of the distinction between transaction and non-transaction and explain why none of these justify a different approach to market definition. I also discuss why some of the policy suggestions made by proponents of the distinction—for example, that a single market should be defined for transaction platforms but separate markets for non-transaction platforms—reflect some confusion about how the HMT works.

Suggested Citation

  • Gunnar Niels, 2019. "Transaction Versus Non-Transaction Platforms: A False Dichotomy In Two-Sided Market Definition," Journal of Competition Law and Economics, Oxford University Press, vol. 15(2-3), pages 327-357.
    • Handle: RePEc:oup:jcomle:v:15:y:2019:i:2-3:p:327-357.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhz016
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    Cited by:

    1. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    2. Daria Kostecka-Jurczyk, 2021. "Abuse of Dominant Position on Digital Market: Is the European Commission Going back to the Old Paradigm?," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 120-132.

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