Working Paper: CEPR ID: DP9164
Authors: Massimo Motta; Helder Vasconcelos
Abstract: In this paper we provide a new way of modelling two-sided markets, and we then use this model to study anti-competitive conduct in an asymmetric two-sided market which captures the main features of some recent antitrust cases. We show that below-cost pricing on one market side can allow an incumbent firm to exclude a more efficient rival which does not have a customer base yet. This exclusionary behaviour is the more likely to occur the more mature the market and the stronger the established customer base of the incumbent.
Keywords: Demand Externalities; Predation; Two-Sided Markets
JEL Codes: L11; L13; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| below-cost pricing (L11) | market exclusion (D49) |
| market maturity and customer base strength (L25) | likelihood of exclusionary behavior (C92) |
| below-cost pricing (L11) | exclusion of more efficient rival (D43) |
| below-cost pricing in UK newspaper market (D40) | procompetitive strategy (L13) |