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Competition in two‐sided markets
Author(s) -
Armstrong Mark
Publication year - 2006
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2006.tb00037.x
Subject(s) - joins , join (topology) , competition (biology) , network effect , monopoly , group (periodic table) , externality , microeconomics , business , industrial organization , database transaction , computer science , commerce , economics , database , mathematics , combinatorics , ecology , biology , chemistry , organic chemistry , programming language
Many markets involve two groups of agents who interact via “platforms,“ where one group's benefit from joining a platform depends on the size of the other group that joins the platform. I present three models of such markets: a monopoly platform; a model of competing platforms where agents join a single platform; and a model of “competitive bottlenecks” where one group joins all platforms. The determinants of equilibrium prices are (i) the magnitude of the cross‐group externalities, (ii) whether fees are levied on a lump‐sum or per‐transaction basis, and (iii) whether agents join one platform or several platforms.