Working Paper: CEPR ID: DP16480
Authors: Alessandro Pavan; Bruno Jullien; Marc Rysman
Abstract: The chapter has 9 sections, covering the theory of two-sided markets and related empirical work. Section 1 introduces the reader to the literature. Section 2 covers the case of markets dominated by a single monopolistic firm. Section 3 discusses the theoretical literature on competition for the market, focusing on pricing strategies that firms may follow to prevent entry. Section 4 discusses pricing in markets in which multiple platforms are active and serve both sides. Section 5 presents alternative models of platform competition. Section 6 discusses richer matching protocols whereby platforms price- discriminate by granting access only to a subset of the participating agents from the other side and discusses the related literature on matching design. Section 7 discusses identification in empirical work. Section 8 discusses estimation in empirical work. Finally, Section 9 concludes.
Keywords: two-sided market; platform pricing; network effects; matching
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Pricing decisions on one side of the market (D49) | Demand on the other side (J23) |
| Increase in price on one side (D41) | Demand on that side (R22) |
| Increase in price on one side (D41) | Demand on the other side (J23) |
| Presence of network effects (D85) | Market power of incumbents (D43) |
| Price discrimination strategies (D40) | Participation from one side of the market (D16) |
| Increased participation from one side (D16) | Overall platform value (D46) |