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The Tension Between Market Shares and Profit Under Platform Competition

Author

Listed:
  • Paul Belleflamme
  • Martin Peitz
  • Eric Toulemonde
Abstract
We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This platform enjoys a competitive advantage on one or both sides. Our finding raises further doubts on using market shares as a measure of market power in platform markets.

Suggested Citation

  • Paul Belleflamme & Martin Peitz & Eric Toulemonde, 2020. "The Tension Between Market Shares and Profit Under Platform Competition," CRC TR 224 Discussion Paper Series crctr224_2021_204v2, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2021_204v2
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp204
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    References listed on IDEAS

    as
    1. Jens-Uwe Franck & Martin Peitz, 2021. "Market Definition in the Platform Economy," CRC TR 224 Discussion Paper Series crctr224_2020_259, University of Bonn and University of Mannheim, Germany.
    2. Anderson, Simon P. & Peitz, Martin, 2020. "Media see-saws: Winners and losers in platform markets," Journal of Economic Theory, Elsevier, vol. 186(C).
    3. repec:hrv:faseco:4589709 is not listed on IDEAS
    4. Belleflamme, Paul & Peitz, Martin, 2019. "Platform competition: Who benefits from multihoming?," International Journal of Industrial Organization, Elsevier, vol. 64(C), pages 1-26.
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    17. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
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    20. Bruno Jullien & Alessandro Pavan, 2019. "Information Management and Pricing in Platform Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(4), pages 1666-1703.
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    Cited by:

    1. Wang, Xintong & Xue, Jingguo & Hou, Xueliang, 2023. "Barriers analysis to Chinese waste photovoltaic module recycling under the background of "double carbon"," Renewable Energy, Elsevier, vol. 214(C), pages 39-54.
    2. Tremblay, Mark J. & Adachi, Takanori & Sato, Susumu, 2023. "Cournot platform competition with mixed-homing," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    3. Giovannetti, Emanuele & Siciliani, Paolo, 2023. "Platform Competition and Incumbency Advantage under Heterogeneous Lock-in effects," Information Economics and Policy, Elsevier, vol. 63(C).
    4. Brenčič, Vera, 2024. "Terms of use and network size: Evidence from online job boards and CV banks in the U.S," Information Economics and Policy, Elsevier, vol. 67(C).
    5. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    6. Sato, Susumu, 2021. "Market shares and profits in two-sided markets," Economics Letters, Elsevier, vol. 207(C).
    7. Biancini, Sara & Verdier, Marianne, 2023. "Bank-platform competition in the credit market," International Journal of Industrial Organization, Elsevier, vol. 91(C).

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    More about this item

    Keywords

    Two-sided platforms; market share; market power; oligopoly; network effects; antitrust;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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