The tension between market shares and profit under platform competition

Paul Belleflamme; Martin Peitz; Eric Toulemonde

doi:10.1016/j.ijindorg.2021.102807

The tension between market shares and profit under platform competition

Paul Belleflamme, Martin Peitz, Eric Toulemonde

Résultats de recherche: Contribution à un journal/une revue › Article › Revue par des pairs

Résumé

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.

langue originale	Anglais
Numéro d'article	102807
journal	International Journal of Industrial Organization
Volume	81
Les DOIs	https://doi.org/10.1016/j.ijindorg.2021.102807
Etat de la publication	Publié - mars 2022

Financement

We are grateful for useful comments from the Editor Julian Wright and two anonymous reviewers. Paul Belleflamme and Eric Toulemonde gratefully acknowledge financial support by Fédération-Wallonie-Bruxelles through “Action de recherche concertée” (Grant No. 19/24-101). Martin Peitz gratefully acknowledges financial support from Deutsche Forschungsgemeinschaft (DFG) through CRC TR 224 (project B05). ? We are grateful for useful comments from the Editor Julian Wright and two anonymous reviewers. Paul Belleflamme and Eric Toulemonde gratefully acknowledge financial support by F?d?ration-Wallonie-Bruxelles through ?Action de recherche concert?e? (Grant No. 19/24-101). Martin Peitz gratefully acknowledges financial support from Deutsche Forschungsgemeinschaft (DFG) through CRC TR 224 (project B05).

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10.1016/j.ijindorg.2021.102807

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title = "The tension between market shares and profit under platform competition",

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.",

keywords = "Antitrust, Market power, Market share, Network effects, Oligopoly, Two-sided platforms",

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note = "Funding Information: We are grateful for useful comments from the Editor Julian Wright and two anonymous reviewers. Paul Belleflamme and Eric Toulemonde gratefully acknowledge financial support by F{\'e}d{\'e}ration-Wallonie-Bruxelles through “Action de recherche concert{\'e}e” (Grant No. 19/24-101). Martin Peitz gratefully acknowledges financial support from Deutsche Forschungsgemeinschaft (DFG) through CRC TR 224 (project B05). Funding Information: ? We are grateful for useful comments from the Editor Julian Wright and two anonymous reviewers. Paul Belleflamme and Eric Toulemonde gratefully acknowledge financial support by F?d?ration-Wallonie-Bruxelles through ?Action de recherche concert?e? (Grant No. 19/24-101). Martin Peitz gratefully acknowledges financial support from Deutsche Forschungsgemeinschaft (DFG) through CRC TR 224 (project B05). Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",

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doi = "10.1016/j.ijindorg.2021.102807",

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N1 - Funding Information: We are grateful for useful comments from the Editor Julian Wright and two anonymous reviewers. Paul Belleflamme and Eric Toulemonde gratefully acknowledge financial support by Fédération-Wallonie-Bruxelles through “Action de recherche concertée” (Grant No. 19/24-101). Martin Peitz gratefully acknowledges financial support from Deutsche Forschungsgemeinschaft (DFG) through CRC TR 224 (project B05). Funding Information: ? We are grateful for useful comments from the Editor Julian Wright and two anonymous reviewers. Paul Belleflamme and Eric Toulemonde gratefully acknowledge financial support by F?d?ration-Wallonie-Bruxelles through ?Action de recherche concert?e? (Grant No. 19/24-101). Martin Peitz gratefully acknowledges financial support from Deutsche Forschungsgemeinschaft (DFG) through CRC TR 224 (project B05). Publisher Copyright: © 2021 Elsevier B.V.

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AB - 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.

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KW - Market power

KW - Market share

KW - Network effects

KW - Oligopoly

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The tension between market shares and profit under platform competition

Résumé

Financement

SDG des Nations Unies

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Document sous embargo

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