Cited by 5,642Digital Platforms and EconomicsMerger and Competition AnalysisAuction Theory and Applications

Platform Competition in Two-Sided Markets

Open access
Rochet, Jean-Charles, Tirole, Jean·2003·Journal of the European Economic Association

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. This paper builds a model of platform competition with two-sided markets. It unveils the determinants of price allocation and end-user 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.

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Crossref · 10.1162/154247603322493212

Cites

14 of 14 references verified0 citation errors · 0 not checkable

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Each is checked against this paper’s own text: does it say what the citing paper says it does?

  • Network effects are present in most platform markets.

    “Since network effects are present in most platform markets, the nonlinear properties of network effects create a dynamic situation in multi-platform spaces.”

    From Smart Timing for Smart Products? Complementor Multihoming in Nascent Platform Markets (2026) · cites this paper as Rochet and Tirole 2003

    The Introduction describes network effects in videogame and payment-card platforms. But its broader statement runs in the other direction: many, if not most, markets with network externalities have two sides that interact through a platform. It does not establish that most platform markets have network effects. No page number is available in our copy. (LLM, conf=0.82)

    Experimental — accuracy not yet measured
  • Platforms reduce the search costs of accessing specialized content, from social connections to products in the gig economy, yet this infrastructure of intermediation is by no means neutral.

    “By acting as matchmaking intermediaries with strong network effects (Rochet and Tirole, 2003), platforms reduce the search costs of accessing specialized content, from social connections (Van Dijck, 2013) to products in the gig economy (Scholz, 2017; Van Doorn, 2017; Wachsmuth and Weisler, 2018), yet this infrastructure of intermediation is by no means neutral (Gillespie, 2010, 2017).”
  • Due to network interaction, individual actors' choices affect other actors' value.

    “Due to network interaction, individual actors' choices affect other actors' value (Jacobides et al., 2024;Rochet & Tirole, 2003)”
  • Platform competition reshapes markets as a whole, unlike conventional inter-firm competition which focuses on moves and counter-moves to capture greater shares of a given market value.

    “While conventional inter-firm competition focuses on moves and counter-moves as strategic actions that enable rivaling firms to capture greater shares of a given market value, platform competition reshapes markets as a whole (Rochet & Tirole, 2003).”

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Cites

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Research works printed but not linked: 3

  1. Fudenberg, D., and J. Tirole (2000) "Pricing Under the Threat of Entry by a Sole Supplier of a Network Good," Journal of Industrial Economics, vol. 48(4):373-390.
  2. Rochet, J.C., and J. Tirole (2002) "Cooperation among Competitors: The Economics of Payment Card Associations," Rand Journal of Economics, 33(4), 1-22.
  3. Wilson, R. (1993) Nonlinear Pricing, Oxford University Press.

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Authors
Rochet, J.-C., & Tirole, J.
Affiliations
Institut d'Économie Industrielle (FR)
Venue
Journal of the European Economic Association
Published
2003-06-01
Volume
1
Issue
4
Pages
990-1029
ISSN
  • 1542-4766 (ISSN-L)
  • 1542-4774
OpenAlex
W1516051863
Cited by
5,642
References
14
Citations by year
2026: 477 · 2025: 384 · 2024: 338 · 2023: 408 · 2022: 411 · 2021: 424 · 2020: 415 · 2019: 374 · 2018: 330 · 2017: 247 · 2016: 238 · 2015: 207 · 2014: 182 · 2013: 188 · 2012: 178
FWCI
259.54
Type
journal article
Language
en
Open access
Locations
  • Journal of the European Economic Association (publishedVersion)
  • London School of Economics and Political Science Research Online (London School of Economics and Political Science) (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • Toulouse 1 Capitole Publications (Université Toulouse I Capitole) (submittedVersion)
  • London School of Economics and Political Science Research Online (London School of Economics and Political Science) (submittedVersion)
  • OpenGrey (Institut de l'Information Scientifique et Technique) (submittedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Digital Platforms and Economics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
  • Social Sciences › Decision Sciences › Management Science and Operations Research › Auction Theory and Applications
Keywords
platform competition, two-sided markets, network effects, platform business models, platform governance

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