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Competition in two-sided markets (2002 version)

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  • Armstrong, Mark

Abstract

There are many examples of markets involving two groups of participants who need to interact via intermediaries. Moreover, these intermediaries usually have to compete for business from both groups. Examples include academic publishing (where journals facilitate the interaction between authors and readers), advertising in media markets (where newspapers or TV channels enable adverts from producers to reach consumers), payment systems (where credit cards can be a convenient method of transaction between consumers and retailers), and telecommunications networks (where networks are used to provide links between callers and those who receive calls). The paper surveys recent theoretical work on these two-sided markets. The main questions are (i) what determines which side of the market is subsidized (if either) in order to attract the other side, and (ii) is the resulting outcome socially efficient?

Suggested Citation

  • Armstrong, Mark, 2002. "Competition in two-sided markets (2002 version)," MPRA Paper 42863, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42863
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    File URL: https://mpra.ub.uni-muenchen.de/42863/1/MPRA_paper_42863.pdf
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    References listed on IDEAS

    as
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    16. repec:bla:jindec:v:50:y:2002:i:2:p:103-22 is not listed on IDEAS
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Carlos Alós-Ferrer & Georg Kirchsteiger & Markus Walzl, 2010. "On the Evolution of Market Institutions: The Platform Design Paradox," Economic Journal, Royal Economic Society, vol. 120(543), pages 215-243, March.
    2. Geoffrey G. Parker & Marshall W. Van Alstyne, 2005. "Two-Sided Network Effects: A Theory of Information Product Design," Management Science, INFORMS, vol. 51(10), pages 1494-1504, October.
    3. Foros, Øystein & Kind, Hans Jarle & Wyndham, Tim, 2019. "Tax-free digital news?," International Journal of Industrial Organization, Elsevier, vol. 66(C), pages 119-136.
    4. Yuan, Michael Y., 2008. "The effects of barriers to entry on monopolistic intermediary online services: The case of a digital library," Socio-Economic Planning Sciences, Elsevier, vol. 42(1), pages 56-73, March.

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    More about this item

    Keywords

    Two-sided markets; oligopoly; network effects; intermediation;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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