The Price Theory of Two-Sided Markets
Open accessAbstract
I show that the comparative statics of the Rochet and Tirole (2003) model of two-sided markets depend crucially on the rate at which the firm passes through the cross-subsidies from one side of the market to the other. If this is less than 1 on both sides, I obtain a formal demonstration for the conventional wisdom (Evans 2003; Wright 2004) on policy in two-sided markets. Conversely if pass-through is greater than 1 on one side, these policy implications are reversed. Exogenous cost variations identify the pass-through rate and can be used to test the model.
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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).”
From The Economics of Two-Sided Markets (2009) · cites this paper as Weyl, 2009
Cites
Platform Competition in Two-Sided Markets
Rochet, J.-C., & Tirole, J. (2003) · Journal of the European Economic Association · doi:10.1162/154247603322493212 · Cited by 5,642 · see citing works
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The Economics of Two-Sided Markets
Rysman, M. (2009) · Journal of Economic Perspectives · doi:10.1257/jep.23.3.125 · Cited by 1,261 · see citing works
- Authors
- Weyl, E. G.
- Affiliations
- Microsoft (United States) (US)
- Corresponding author
- Weyl, Eric Glen
- ORCID
- Weyl, Eric Glen
- Venue
- SSRN Electronic Journal
- Publisher
- Elsevier BV
- Published
- 2009
- ISSN
- 1556-5068 (ISSN-L)
- OpenAlex
- W174744101
- Cited by
- 37
- References
- 1
- Citations by year
- 2022: 1 · 2021: 1 · 2017: 1 · 2016: 3 · 2014: 3 · 2013: 5 · 2012: 3
- Type
- posted content
- Language
- en
- Open access
- green
- doi.org
- Locations
- SSRN Electronic Journal (acceptedVersion)
- 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, price theory, cross-subsidization, pass-through rates, comparative statics, market power, competition policy
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