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Cited by 1,282Digital Platforms and EconomicsMerger and Competition AnalysisConsumer Market Behavior and Pricing

The Economics of Two-Sided Markets

Open access
Rysman, Marc·2009·Journal of Economic Perspectives
DOI 10.1257/jep.23.3.125
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Abstract

Broadly speaking, a two-sided market is one in which 1) two sets of agents interact through an intermediary or platform, and 2) the decisions of each set of agents affects the outcomes of the other set of agents, typically through an externality. In the case of a video game system, the intermediary is the console producer—Sony in the scenario above—while the two sets of agents are consumers and video game developers. Neither consumers nor game developers will be interested in the PlayStation if the other party is not. Similarly, a successful payment card requires both consumer usage and merchant acceptance, where both consumers and merchants value each others' participation. Many more products fit into this paradigm, such as search engines, newspapers, and almost any advertiser-supported media (examples in which consumers typically negatively value, rather than positively value, the participation of the other side), as well as most software or title-based operating systems and consumer electronics. This paper seeks to explain what two-sided markets are and why they interest economists. I discuss the strategies that firms typically consider, and I highlight a number of puzzling outcomes from the perspective of the economics of two-sided markets. Finally, I consider the implications for public policy, particularly antitrust and regulatory policy, where there have been a number of recent issues involving media, computer operating systems, and payment cards.

Integrity signals

Registry

Crossref · 10.1257/jep.23.3.125

Cites

234 of 234 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Claims the paper makes

2 of 18 cited sources checked · 1 supported · 0 flagged · accuracy not yet measured

  • Interpretationcitation

    Two-sided markets often seem to evolve toward a situation where members of one side use a single platform and the other side uses multiple platforms.

    “In fact, two-sided markets often seem to evolve toward to a situation where members of one side use a single platform and the other side uses multiple platforms; Armstrong (2006, Section 5) makes this point and provides formal analysis.”
    Quote in the paperNot a substantial claim1 of 1 sources checked
    • cites Armstrong (2006, Section 5) source

      Section 5, “Competitive bottlenecks” (page unavailable), formally analyzes a market in which one group uses a single platform and the other uses multiple platforms. The discussion preceding Section 5 says several important markets resemble this configuration. The paper does not establish that markets evolve toward it over time. (LLM, conf=0.83)

      Experimental — accuracy not yet measured
  • Premisereasoning

    Firms compete aggressively on the side that uses a single network in order to charge monopoly prices to the other side that is trying to reach them.

    “Hence, firms compete aggressively on the side that uses a single network in order to charge monopoly prices to the other side that is trying to reach them (Armstrong, 2006).”
    Quote in the paperSubstantial claim1 of 1 sources checked
    • cites Armstrong, 2006 source
  • Interpretationreasoning

    Two-sided markets allow for a new form of price discrimination: discrimination based on heterogeneity in the attractiveness of an agent to the other side.

    “In addition, two-sided markets allow for a new form of price discrimination: discrimination based on heterogeneity in the attractiveness of an agent to the other side.”
    Quote in the paperSubstantial claim
  • Interpretationreasoning

    Payment cards and newspapers seem much less flexible in terms of the choice of two-sidedness.

    “These markets seem much less flexible in terms of the choice of two-sidedness.”
    Quote in the paperNot a substantial claim
  • Premisenone given

    In newspapers, advertising prices depend on consumer demand for advertising, with relatively low prices for advertisements that consumers more highly value.

    “Advertising prices depend on consumer demand for advertising as well, with relatively low prices for advertisements that consumers more highly value (such as classified advertisements and some local advertisements).”
    Quote in the paperNot a substantial claim
  • Classified as probably not a substantial claim. 34
  • May combine two claims. 39

  • Probably not a substantial claim: may not pass S4 (based).

    Premisenone given

    The merchant's bank must pay the consumer's bank an interchange fee, a percent of each transaction.

    “Of great controversy is that the merchant's bank must pay the consumer's bank an “interchange fee,” a percent of each transaction.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisenone given

    Providers of platforms often prefer incompatibility on the grounds that it locks in current customers and locks out competitors.

    “Providers of platforms often prefer incompatibility on the grounds that it locks in current customers and locks out competitors.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

    Interpretationnone given

    The interchange fee presumably explains why banks can offer generous rewards programs to consumers for using their credit cards.

    “The interchange fee presumably explains why banks can offer generous rewards programs to consumers for using their credit cards.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    This result might explain why payment card pricing has increasingly favored consumers over time rather than merchants, since consumers and not merchants typically use a single network and competition among card networks has become more important relative to competition between card networks and cash.

    “This result might explain why payment card pricing has increasingly favored consumers over time rather than merchants (for instance, with the rise of rewards programs), since consumers and not merchants typically use a single network and competition among card networks has become more important relative to competition between card networks and cash.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Payment associations offered supermarkets relatively low interchange fees, which led to low bank fees and ultimately to the adoption of payment card usage by supermarkets.

    “Hence, payment associations offered supermarkets relatively low interchange fees, which led to low bank fees and ultimately to the adoption of payment card usage by supermarkets.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

    Interpretationnone given

    These changes do not appear to have led to a strategic change with respect to interchange policy.

    “These changes do not appear to have led to a strategic change with respect to interchange policy.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    If serving consumers and merchants is perfectly competitive, then the interchange fee does not affect the profits of the member banks.

    “However, as Rochet and Tirole (2002) point out, if serving consumers and merchants is perfectly competitive, then the interchange fee does not affect the profits of the member banks.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Rochet and Tirole (2002) source

  • Probably not a substantial claim: may not pass S2 (checkable), S3 (load-bearing). May combine two claims.

    Interpretationreasoning

    It may be better to discuss two-sided strategies rather than two-sided markets, because two-sidedness is an endogenous choice in some markets, not a technologically determined outcome.

    “Thus, it may be better to discuss two-sided “strategies” rather than two-sided “markets,” because two-sidedness is an endogenous choice in some markets, not a technologically determined outcome.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

    Premisenone given

    The interchange fee is set by the card association, and in this sense is set cooperatively by the member banks.

    “The interchange fee is set by the card association, and in this sense is set cooperatively by the member banks.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisenone given

    Merchants typically accept payment on multiple networks, for example Visa, Mastercard, American Express, and Discover, as well as via alternatives such as on-line debit cards and personal checks.

    “Merchants typically accept payment on multiple networks-for example, Visa, Mastercard, American Express, and Discover-as well as via alternatives such as on-line debit cards and personal checks.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisenone given

    Newspapers are a canonical two-sided market, where the newspaper provides a platform for communication from advertisers to consumers.

    “Newspapers are a canonical two-sided market, where the newspaper provides a platform for communication from advertisers to consumers.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    In any market, prices typically fall as the price elasticity of demand increases, but in a two-sided market the effect can be even larger: the low price on one side not only attracts elastic consumers on that side but also leads to higher prices or more participation on the other side.

    “For instance, in any market, prices typically fall as the price elasticity of demand increases, but in a two-sided market the effect can be even larger: The low price on one side not only attracts elastic consumers on that side but also, as a result, leads to higher prices or more participation on the other side.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    Lowering the consumer price attracts consumers from the competing platform, which degrades the value of the competitor to buyers, and hence leads to a larger increase in buyer interest in the original platform.

    “But now, lowering the consumer price attracts consumers from the competing platform, which degrades the value of the competitor to buyers, and hence leads to a larger increase in buyer interest in the original platform.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

    Premisereasoning

    The merchant's fee is set to reflect the interchange cost and is usually only slightly higher than the interchange fee.

    “The merchant's fee is set to reflect this cost and is usually only slightly higher than the interchange fee.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

    Premisenone given

    A successful operating system requires consumer adoption as well as software development by software vendors.

    “A successful operating system requires consumer adoption as well as software development by software vendors.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationcitation

    Discrimination increases the value extracted on one side, which leads to lower prices on the other side which has now become more valuable.

    “Thus, discrimination increases the value extracted on one side, which leads to lower prices on the other side which has now become more valuable (Weyl, 2009).”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Weyl, 2009 source

  • May combine two claims.

    Interpretationreasoning

    Microsoft can be characterized as managing a three-sided market between consumers, software providers, and hardware providers, whereas Apple manages only a two-sided market between consumers and software providers.

    “That is, we can characterize Microsoft as managing a three-sided market between consumers, software providers, and hardware providers, whereas Apple manages only a two-sided market between consumers and software providers.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

    Premisenone given

    Mastercard and Visa incorporated in 2006 and 2007 and so are organized as for-profit corporations rather than as associations or cooperatives.

    “Note that Mastercard and Visa incorporated in 2006 and 2007 and so are organized as for-profit corporations rather than as associations or cooperatives.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisenone given

    Payment cards like Visa, MasterCard, and American Express are two-sided in the sense that they require consumer usage and merchant acceptance to be successful.

    “Payment cards like Visa, MasterCard, and American Express are two-sided in the sense that they require consumer usage and merchant acceptance to be successful.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisenone given

    It is common to establish a technological standard through free distribution of a basic product and then profit on peripheral products.

    “Similarly, it is common to establish a technological standard through free distribution of a basic product (for instance, Adobe's free distribution of Reader popularizes the PDF standard) and then profit on peripheral products (such as Adobe Acrobat).”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisereasoning

    A successful payment card requires both consumer usage and merchant acceptance, where both consumers and merchants value each other's participation.

    “Similarly, a successful payment card requires both consumer usage and merchant acceptance, where both consumers and merchants value each others' participation.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisenone given

    In markets with multiple newspapers, consumers typically read only one newspaper whereas advertisers appear in all of them.

    “In markets with multiple newspapers, consumers typically read only one newspaper whereas advertisers appear in all of them.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Advertising to one side that raises the mark-up on that side leads to lower prices on the other side, and vice versa.

    “In addition, there is a more subtle effect through mark-ups: advertising to one side that raises the mark-up on that side leads to lower prices on the other side, and vice versa.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S2 (checkable). May combine two claims.

    Interpretationcitation

    If there is no antitrust violation in setting interchange fees but the equilibrium outcome diverges from the social optimum, then price regulation may be a reasonable solution.

    “If there is no antitrust violation in setting interchange fees but the equilibrium outcome diverges from the social optimum (as in Rochet and Tirole, 2002), then price regulation may be a reasonable solution.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Rochet and Tirole, 2002 source

  • May combine two claims.

    Interpretationcitation

    It is unlikely that the theory of two-sided markets will have much effect on predatory pricing prosecution, although there is some movement to make predatory pricing easier to prosecute.

    “As such, it is unlikely that the theory of two-sided markets will have much effect here, although there is some movement to make predatory pricing easier to prosecute(Brodley, Bolton, and Riordan, 2000).”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Brodley, Bolton, and Riordan, 2000

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    If sellers cannot differentiate aside from adopting a standard, they must differentiate by choosing separate standards, which leads to the adoption of multiple standards or even adoption failure.

    “If the sellers cannot differentiate aside from adopting a standard, they must differentiate by choosing separate standards, which leads to the adoption of multiple standards (Ellison and Fudenberg, 2003) or even adoption failure (Augereau, Greenstein, and Rysman, 2006;Kretschmer, 2008).”
    Quote in the paperSubstantial claim0 of 2 sources checked
    • cites Ellison and Fudenberg, 2003 source
    • cites Augereau, Greenstein, and Rysman, 2006;Kretschmer, 2008

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Premisecitation

    Cash is more costly to process than credit card payments, whereas electronic debit is cheaper.

    “For instance, cash is more costly to process than credit card payments, whereas electronic debit is cheaper (Reserve Bank of Australia, 2007).”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Reserve Bank of Australia, 2007

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Interpretationreasoning

    The economics of two-sided markets can play an important role in guiding the determination of the optimal interchange fee, although it does not appear to have done so to date.

    “The economics of two-sided markets can play an important role in guiding the determination of the optimal fee, although it does not appear to have done so to date.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Knittel and Stango (2008) argue that deregulating surcharges for ATMs had a major role in causing the expansion.

    “Knittel and Stango (2008) argue that deregulating surcharges for ATMs had a major role in causing the expansion.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Knittel and Stango (2008) source

  • Probably not a substantial claim: may not pass S4 (based). May combine two claims.

    Premisereasoning

    Two-sided markets typically have network effects and as such are likely to tip toward a single dominant platform.

    “Two-sided markets typically have network effects and as such are likely to tip toward a single dominant platform.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Fees were deregulated in the ATM market, in contrast with the current trend toward regulation in payment cards.

    “Hence, fees were deregulated in this market, in contrast with the current trend toward regulation in payment cards.”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: Increased prices led to more consumer usage rather than less because ATMs were much more conveniently located.

  • May combine two claims.

    Interpretationreasoning

    Persuasive advertising on one side can lead to lower prices on the other side, whereas informative advertising on one side leads to higher prices on the other.

    “Thus, persuasive advertising on one side can lead to lower prices on the other side, whereas informative advertising on one side leads to higher prices on the other.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

    Premisenone given

    Video games compete with a host of leisure activities for consumer attention, but not for game developer attention.

    “Video games compete with a host of leisure activities for consumer attention, but not for game developer attention.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S2 (checkable).

    Interpretationnone given

    The economics of two-sided markets is highly relevant for pricing analysis in antitrust.

    “It seems clear that the economics of two-sided markets is highly relevant for pricing analysis in antitrust.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S2 (checkable), S4 (based).

    Interpretationnone given

    The literature on two-sided markets has important policy implications for pricing analysis, an important feature of regulation and a large part of antitrust analysis.

    “The literature has important policy implications for pricing analysis, an important feature of regulation and a large part of antitrust analysis.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S4 (based). May combine two claims.

    Interpretationnone given

    The author predicts that two-sided analysis will grow in importance in areas where pricing analysis is important, whereas the effect will be more limited in exclusionary conduct cases such as monopolization and conditional sales.

    “In general, my prediction is that two-sided analysis will grow in importance in areas where pricing analysis is important, whereas the effect will be more limited in exclusionary conduct cases such as monopolization and conditional sales.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    In the Nabanco case, the technical legal question was about cooperation and the nature of the Visa association, not about two-sided markets.

    “However, the technical legal question was about cooperation and the nature of the Visa association, not about two-sided markets.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

    Premisenone given

    Newspapers compete with billboards for advertising, but not for consumer readership.

    “For example, newspapers compete with billboards for advertising, but not for consumer readership.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    The interchange fees imposed in Australia may or may not raise social welfare, but the process for determining the fee surely diverges from the prescription of the economics of two-sided markets.

    “The interchange fees imposed in Australia may or may not raise social welfare, but the process for determining the fee surely diverges from the prescription of the economics of two-sided markets.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    In the Microsoft monopolization case, pricing issues were crucial and two-sided market concerns were relatively important in establishing market power.

    “Here, pricing issues were crucial and two-sided market concerns were relatively important.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S4 (based).

    Interpretationnone given

    Economic theory suggests that any determination of the optimal interchange fee should consider the marginal costs of serving both consumers and merchants as well as price elasticities of demand and interaction elasticities of demand to usage on the other side of the market.

    “Economic theory suggests that any determination of the optimal interchange fee should consider the marginal costs of serving both consumers and merchants as well as price elasticities of demand and interaction elasticities of demand to usage on the other side of the market.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationreasoning

    From different perspectives, the same business may have different numbers of sides.

    “From different perspectives, the same business may have different numbers of sides.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S2 (checkable), S3 (load-bearing).

    Interpretationnone given

    Certain more subtle strategies are more common in two-sided than in one-sided markets.

    “Certain more subtle strategies are more common in two-sided than in onesided markets.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Advertising on one side raises participation and usage on that side, which raises demand on the other side, and so advertising on one side can lead to higher prices on the other.

    “Advertising on one side raises participation and usage on that side, which raises demand on the other side, and so advertising on one side can lead to higher prices on the other.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    In monopolization cases, determining the difference between optimal and equilibrium prices has little role in establishing the legality of an action, although it may have an important role in determining whether a firm has market power.

    “That is, determining the difference between optimal and equilibrium prices has little role in establishing the legality of an action in a monopolization case (although it may have an important role in determining the requisite question of whether a firm has market power).”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: Inefficient pricing is not an antitrust violation by itself.
    • Rests on an assumption: Monopolization and vertical contracting cases typically hinge on whether a firm has excluded competitors from the market in a way that did not benefit consumers or reduce costs.

  • May combine two claims.

    Premisecitation

    In the Nabanco v. Visa case, the court deemed the alternative to collective setting of interchange fees-independent bilateral negotiation-unworkable, and hence the collectively set interchange fee was legal as necessary to provide the Visa card.

    “The court deemed that system unworkable, and hence the collectively set interchange fee was legal as it was necessary to provide the Visa card.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites National Bancard Corp.(Nabanco) v. Visa U.S.A., Inc. (779 F.2d 592 [11 th Cir.1986])

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Interpretationreasoning

    Internet service providers can be seen as platforms matching Internet users to content providers, and hence the concept of net neutrality is often evaluated from the perspective of two-sided markets.

    “The Internet service providers can be seen as platforms matching Internet users to content providers and hence, the concept of net neutrality is often evaluated from the perspective of two-sided markets.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim. May combine two claims.

    Interpretationreasoning

    The economics of two-sided markets provides insights primarily into pricing and so is likely to be particularly important for the parts of antitrust enforcement that focus on pricing issues.

    “The economics of two-sided markets provides insights primarily into pricing and so is likely to be particularly important for the parts of antitrust enforcement that focus on pricing issues.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S2 (checkable). May combine two claims.

    Interpretationreasoning

    In a two-sided market, we should consider multiple prices and, potentially, different measures of competition for each side.

    “In a two-sided market, we should consider multiple prices and, potentially, different measures of competition for each side.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S2 (checkable), S3 (load-bearing), S4 (based).

    Interpretationnone given

    The economics of two-sided markets are important for a wide variety of public policy issues.

    “The economics of two-sided markets are important for a wide variety of public policy issues.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S2 (checkable), S3 (load-bearing). May combine two claims.

    Interpretationreasoning

    Pricing issues are the main thrust of a great deal of economic regulation, and as such, the economics of two-sided markets can make a large contribution.

    “Pricing issues are the main thrust of a great deal of economic regulation, and as such, the economics of two-sided markets can make a large contribution.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationnone given

    A platform firm must be concerned not only with its own quality and advertising, but also that of the vendors who operate over its network.

    “Also, a platform firm must be concerned not only with its own quality and advertising, but also that of the vendors who operate over its network.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    The effects of quality investment will depend on whether it generates relatively price-elastic or -inelastic consumers on the margin, and on whether it attracts consumers that are more or less responsive to participation on the other side.

    “Similarly, the effects of quality investment will depend on whether it generates relatively price-elastic or -inelastic consumers on the margin, and on whether it attracts consumers that are more or less responsive to participation on the other side.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    In the Microsoft case, pricing was not a primary issue in the calculation of consumer benefits versus losses from a weakened Netscape, and it is unclear that two-sided market economics offers much guidance.

    “Pricing was not a primary issue in this calculation, and it is unclear that two-sided market economics offers much guidance.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim. May combine two claims.

    Interpretationnone given

    An ATM network is two-sided in the sense that it is more valuable to consumers if it can reach more banks and more valuable to banks if more consumers use it, which is often a function of how many locations a network reaches.

    “A network of ATMs is two-sided in the sense that it is more valuable to consumers if it can reach more banks and more valuable to banks if more consumers use it, which is often a function of how many locations a network reaches.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

    Interpretationnone given

    Common strategies in one-sided markets like innovation, advertising, and quality investment can take on added dimensions in a two-sided market.

    “Common strategies in one-sided markets like innovation, advertising, and quality investment can take on added dimensions in a two-sided market.”
    Quote in the paperNot a substantial claim
56 of 56

  • The paper relies on this without support.

    Two-sidedness may exist in practically all markets.

    “That is, although two-sidedness may exist in practically all markets, it is not always quantitatively important.”

  • The paper relies on this without support.

    The difference in industries between the two-sided markets literature and the network effects literature is not crucial.

    “However, the difference in industries is not crucial, and there are exceptions on both sides.”

  • The paper relies on this without support.

    The two-sided markets literature and the network effects literature have a lot in common.

    “Many papers that study operating systems identify themselves with network effects rather than two-sided markets so perhaps this example is less canonical, but as I have argued, the two literatures have a lot in common.”

  • The paper relies on this without support.

    Antitrust authorities typically use the size of cross-price elasticities to determine what products should be included in a relevant market.

    “Antitrust authorities typically use the size of cross-price elasticities to determine what products should be included in a relevant market.”

  • The paper relies on this without support.

    Inefficient pricing is not an antitrust violation by itself.

    “Although inefficient pricing is the hallmark of the economic criticism of monopoly power, inefficient pricing is not an antitrust violation by itself.”

  • The paper relies on this without support.

    Monopolization and vertical contracting cases typically hinge on whether a firm has excluded competitors from the market in a way that did not benefit consumers or reduce costs.

    “Monopolization and vertical contracting cases typically hinge on whether a firm has excluded competitors from the market in a way that did not benefit consumers or reduce costs.”

  • The paper relies on this without support.

    In December 2007, the European Commission ruled that the interchange fee at MasterCard for cross-border transactions is collusive and illegal.

    “In December 2007, the European Commission ruled that the interchange fee at MasterCard (for crossborder transaction) is collusive and illegal.”

  • The paper relies on this without support.

    MasterCard can exist with a zero-interchange fee.

    “Since MasterCard can exist with a zero-interchange fee, the exemption to the joint behavior was eliminated.”

  • The paper relies on this without support.

    Increased prices led to more consumer usage rather than less because ATMs were much more conveniently located.

    “Furthermore, increased prices led to more consumer usage rather than less because ATMs were much more conveniently located.”
9 of 9

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

Each contradiction between two passages listed here was confirmed by an independent check.

  • Conflicting RAND journal volumes for the same 2006 issue

    Minor

    The references assign volume 37, issue 3 and volume 35, issue 3 of The RAND Journal of Economics to 2006. Both cannot identify that journal's third issue in the same year.

1 of 1

Cites

Flagged first, then by citations

Research works printed but not linked: 5

  1. Boudreau Kevin, 2007, MIT Sloan Research Paper, 4611
  2. Brodley Joseph F, 2000, Georgetown Law Journal, 88, 2239
  3. Ellison Glenn, 2009, Econometrica, 77, 427
  4. Evans David S, 2003, Yale Journal on Regulation, 20, 325
  5. Rysman Marc, 2007, Competition Policy International, 3, 197

Cited by

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Related

Authors
Rysman, M.
Affiliations
Boston University (US)
Corresponding author
Rysman, Marc
ORCID
Rysman, Marc
Venue
Journal of Economic Perspectives
Publisher
American Economic Association
Published
2009-08-01
Volume
23
Issue
3
Pages
125-143
ISSN
0895-3309 (ISSN-L)
DOI
10.1257/jep.23.3.125
OpenAlex
W1982461819
Semantic Scholar
1c0c366611a5049d783edb97c8fce22b666c4622
Cited by
1,261
References
71
Citations by year
2026: 68 · 2025: 74 · 2024: 77 · 2023: 93 · 2022: 85 · 2021: 95 · 2020: 124 · 2019: 92 · 2018: 87 · 2017: 70 · 2016: 81 · 2015: 57 · 2014: 72 · 2013: 76 · 2012: 47
FWCI
103.49
Type
journal article
Language
en
Open access
Licence
other-oa
Locations
  • The Journal of Economic Perspectives (publishedVersion, other-oa)
  • RePEc: Research Papers in Economics (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 › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
Keywords
two-sided markets, platform intermediaries, network effects, externalities, payment cards, video game consoles, operating systems, competition policy, regulation, public policy, consumer electronics, search engines

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Claims read by deepseek-v4.1-flash under definition version 3 (extract-v3) on 2026-10-11.

Classified by jev-1.13-20260917 (gold-guideline-v0.2) on 2026-10-11.

Cited sources are checked by gpt-6-sol.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

What counts as a claim ›How we measure confidence ›How we check this ›

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