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A Preference-Based Model of Competition among Platforms

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  • Paolo Bertoletti

Abstract

We propose a novel approach to study competition among platforms. In particular, we consider representative consumer’s preferences over the services platforms provide and the commodities they intermediate. Platforms are assumed to be large, intermediating a variety of commodities offered by sellers under monopolistic competition and free entry, and competing à la Cournot. We use a duopoly setting to discuss the welfare implications of platform exchange commissions, which are typically significant in real-world cases. Our preliminary finding is that positive commission actually worsens consumer welfare by reducing the platform price-adjusted quality indexes.

Suggested Citation

  • Paolo Bertoletti, 2021. "A Preference-Based Model of Competition among Platforms," Working Papers 468, University of Milano-Bicocca, Department of Economics.
    • Handle: RePEc:mib:wpaper:468
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    File URL: http://repec.dems.unimib.it/repec/pdf/mibwpaper468.pdf
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    References listed on IDEAS

    as
    1. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    2. Etro, Federico, 2021. "Device-funded vs ad-funded platforms," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    3. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
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    Cited by:

    1. Etro, Federico, 2023. "Platform competition with free entry of sellers," International Journal of Industrial Organization, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    platform competition; two-sided markets; market intermediation;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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