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Two-sided markets, competitive bottlenecks and exclusive contracts.

Abstract:

We provide a framework for analyzing two-sided markets that allows for different degrees of product differentiation on each side of the market. When platforms are viewed as homogenous by sellers but heterogeneous by buyers, we show that “competitive bottlenecks” arise endogenously. In equilibrium, platforms do not compete directly for sellers, instead choosing to compete indirectly by subsidizing buyers to join. Sellers are left with none of the gains from trade. Despite this, it is sellers w...

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Publisher copy:
10.1007/s00199-006-0114-6

Authors


Mark Armstrong More by this author
Julian Wright More by this author
Journal:
Economic Theory
Volume:
32
Issue:
2
Publication date:
2007
DOI:
URN:
uuid:0954c41b-1820-47db-8c0e-c0fba0f53e1a
Local pid:
oai:economics.ouls.ox.ac.uk:15247
Language:
English

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