IDEAS home Printed from https://ideas.repec.org/p/ide/wpaper/654.html
   My bibliography  Save this paper

Platform Competition in Two-Sided Markets

Author

Listed:
  • Rochet, Jean-Charles
  • Tirole, Jean

Abstract

Many if not most markets with network externalities are two-sided. To succeed, platforms in industries such as software, portals and media, payment systems and the Internet, must "get both sides of the market on board ". Accordingly, platforms devote much attention to their business model, that is to how they court each side while making money overall. The paper builds a model of platform competition with two-sided markets. It unveils the determinants of price allocation and enduser surplus for different governance structures (profit-maximizing platforms and not-for-profit joint undertakings), and compares the outcomes with those under an integrated monopolist and a Ramsey planner.

Suggested Citation

  • Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:654
    as

    Download full text from publisher

    File URL: http://idei.fr/sites/default/files/medias/doc/wp/2002/platform.pdf
    File Function: Full text
    Download Restriction: no
    File URL: http://idei.fr/sites/default/files/medias/doc/wp/2002/platformnov26_abs.pdf
    File Function: Abstract
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    2. Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick & Tirole, Jean, 2003. "Internet Interconnection and the Off-Net-Cost Pricing Principle," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 370-390, Summer.
    3. Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March.
    4. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    5. repec:bla:jindec:v:50:y:2002:i:2:p:103-22 is not listed on IDEAS
    6. Doh-Shin Jeon & Jean-Jacques Laffont & Jean Tirole, 2004. "On the Receiver-Pays Principle," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 85-110, Spring.
    7. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    8. Hausman, Jerry A & Leonard, Gregory K & Tirole, Jean, 2003. "On Nonexclusive Membership in Competing Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 43-62, Spring.
    9. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    10. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    11. Caillaud, Bernard & Jullien, Bruno, 2001. "Chicken and Egg: Competing Matchmakers," CEPR Discussion Papers 2885, C.E.P.R. Discussion Papers.
    12. Geoffrey G. Parker & Marshall W. Van Alstyne, 2000. "Information Complements, Substitutes, and Strategic Product Design," William Davidson Institute Working Papers Series 299, William Davidson Institute at the University of Michigan.
    13. Dan Elfenbein & Josh Lerner, 2001. "Links and Hyperlinks: An Empirical Analysis of Internet Portal Alliances, 1995-1999," NBER Working Papers 8251, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Benjamin E. Hermalin & Michael L. Katz, 2011. "Customer or Complementor? Intercarrier Compensation with Two‐Sided Benefits," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 379-408, June.
    2. Mark McCabe & Christopher Snyder, 2004. "The Economics of Open-Access Journals," Working Papers 04-18, NET Institute, revised Nov 2004.
    3. repec:zbw:bofism:2006_038 is not listed on IDEAS
    4. Armstrong, Mark, 2002. "Competition in two-sided markets (2002 version)," MPRA Paper 42863, University Library of Munich, Germany.
    5. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Scientific Monographs, Bank of Finland, number 2006_038.
    6. Howell, Bronwyn, 2006. "Unveiling 'Invisible Hands': Two-Sided Platforms in Health Care Markets," Working Paper Series 3841, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    7. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Bank of Finland Scientific Monographs, Bank of Finland, volume 0, number sm2006_038, July.
    8. Doh-Shin Jeon & Nikrooz Nasr, 2016. "News Aggregators and Competition among Newspapers on the Internet," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 91-114, November.
    9. Sjaak Hurkens & Doh-Shin Jeon, 2008. "A Retail Benchmarking Approach to Efficient Two-Way Access Pricing: Termination-Based Price Discrimination with Elastic Subscription Demand," Working Papers 08-41, NET Institute, revised Nov 2008.
    10. Andrei Hagiu, 2004. "Two-Sided Platforms: Pricing and Social Efficiency," Discussion papers 04035, Research Institute of Economy, Trade and Industry (RIETI).
    11. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    12. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    13. Ming Chung Chang & Hsiao‐Ping Peng, 2009. "Structure Regulation, Price Structure, Cross‐Subsidization And Marginal Cost Of Public Funds," Manchester School, University of Manchester, vol. 77(6), pages 675-698, December.
    14. Xing Wan & Javier Cenamor & Geoffrey Parker & Marshall Van Alstyne, 2017. "Unraveling Platform Strategies: A Review from an Organizational Ambidexterity Perspective," Sustainability, MDPI, vol. 9(5), pages 1-18, May.
    15. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
    16. Hemant K. Bhargava & Vidyanand Choudhary, 2004. "Economics of an Information Intermediary with Aggregation Benefits," Information Systems Research, INFORMS, vol. 15(1), pages 22-36, March.
    17. Drew Fudenberg, 2015. "Tirole's Industrial Regulation and Organization Legacy in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(3), pages 771-800, July.
    18. J. Scott MARCUS, 2008. "IP-based NGNs and Interconnection: The Debate in Europe," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(72), pages 17-32, 4th quart.
    19. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    20. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December.
    21. Volker Nocke & Martin Peitz & Konrad Stahl, 2007. "Platform Ownership," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1130-1160, December.

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ide:wpaper:654. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/idtlsfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.