The Tension Between Market Shares and Profit Under Platform Competition

Working Paper: CEPR ID: DP15204

Authors: Paul Belleflamme; Martin Peitz; Eric Toulemonde

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 platform enjoys a competitive advantage on one or both sides. Our finding raises further doubts on using market shares as a measure of market power in platform markets.

Keywords: two-sided platforms; market share; market power; oligopoly; network effects; antitrust

JEL Codes: D43; L13; L86


Causal Claims Network Graph

Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.


Causal Claims

CauseEffect
market share (L17)profit (L21)
competitive advantage (L21)market share (L17)
cross-group network effects (D85)market share (L17)
price sensitivity differences (D40)profit (L21)

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