Two-Sided Markets with Pecuniary and Participation Externalities

Schmidtke, Richard (Juni 2006): Two-Sided Markets with Pecuniary and Participation Externalities. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2006-19

Abstract

The existing literature on "two-sided markets" addresses participation externalities, but so far it has neglected pecuniary externalities between competing platforms. In this paper we build a model that incorporates both externalities. In our setup differentiated platforms compete in advertising and offer consumers a service free of charge (such as a TV program) that is financed through advertising. We show that advertising can exhibit the properties of a strategic substitute or complement. Surprisingly, there exist cases in which platforms benefit from market entry. Moreover, we show that from a welfare point of view perfect competition is not always desirable.

• Dokumententyp: Paper
• Keywords: two-sided markets, broadcasting, advertising, market entry, digital television
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Munich Discussion Papers in Economics ; Volkswirtschaft > Munich Discussion Papers in Economics > Industrieökonomik ; Volkswirtschaft > Lehrstühle > Seminar für Komparative Wirtschaftsforschung
• Themengebiete: 300 Sozialwissenschaften > 300 Sozialwissenschaft, Soziologie ; 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: D43, L13, L82
• Sprache: Englisch