Estimating platform market power in two-sided markets with an application to magazine advertising

American Economic Journal: Microeconomics, Minjae Song, May 2021, Volume 13, Issue 2

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In two-sided markets, two groups of agents interact through platforms. Because agents’ decision to join a platform is affected by the presence of agents on the other side, their interactions create indirect network externalities and make platforms’ strategies different from those of firms in one-sided markets. In this paper, I use a structural model to show that platforms may take a loss on one side of the market to make a profit on the other side and that platform mergers may benefit some agents by lowering prices or attracting more agents on the other side of the market.

Authors

Minjae Song
The Brattle Group

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