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The tension between market shares and profit under platform competition

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  • Belleflamme, Paul

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Peitz, Martin
  • Toulemonde, Eric

Abstract

We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This is compatible with higher price-cost margins on one or both sides, noting that in the latter case one margin must be negative. Our finding raises further doubts on using market shares as a measure of market power in platform markets.

Suggested Citation

  • Belleflamme, Paul & Peitz, Martin & Toulemonde, Eric, 2022. "The tension between market shares and profit under platform competition," LIDAM Reprints CORE 3191, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3191
    DOI: https://doi.org/10.1016/j.ijindorg.2021.102807
    Note: In: International Journal of Industrial Organization, 2022, vol. 81, 102807
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    References listed on IDEAS

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    Cited by:

    1. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    2. Sato, Susumu, 2021. "Market shares and profits in two-sided markets," Economics Letters, Elsevier, vol. 207(C).
    3. Biancini, Sara & Verdier, Marianne, 2023. "Bank-platform competition in the credit market," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    4. Wang, Xintong & Xue, Jingguo & Hou, Xueliang, 2023. "Barriers analysis to Chinese waste photovoltaic module recycling under the background of "double carbon"," Renewable Energy, Elsevier, vol. 214(C), pages 39-54.
    5. Tremblay, Mark J. & Adachi, Takanori & Sato, Susumu, 2023. "Cournot platform competition with mixed-homing," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    6. Giovannetti, Emanuele & Siciliani, Paolo, 2023. "Platform Competition and Incumbency Advantage under Heterogeneous Lock-in effects," Information Economics and Policy, Elsevier, vol. 63(C).
    7. Brenčič, Vera, 2024. "Terms of use and network size: Evidence from online job boards and CV banks in the U.S," Information Economics and Policy, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Two-sided platforms ; Market share ; Market power ; Oligopoly ; Network effects ; Antitrust;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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