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Resale Price Maintenance In Two‐Sided Markets
Author(s) -
Gabrielsen Tommy Staahl,
Johansen Bjørn Olav,
Lømo Teis Lunde
Publication year - 2018
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12182
Subject(s) - resale price maintenance , competition (biology) , incentive , microeconomics , value (mathematics) , welfare , nonlinear pricing , vertical restraints , business , economic surplus , industrial organization , economics , computer science , market economy , ecology , machine learning , biology
We consider competing two‐sided platforms selling directly to one side of the market, and through an agent to the other side. Platforms offer nonlinear tariffs, and can choose whether to contract with the same or different agents. We study the platforms’ incentives to impose resale price maintenance (RPM), and the effect on end customers. We find that, even if customers on both sides value each other's participation, platforms impose minimum RPM to raise prices on both sides simultaneously if platform competition is sufficiently strong. In a linear demand example, we find that overall welfare decreases with minimum prices and increases with maximum prices.