Two-sided Markets and Digital Platforms
- First, basic theory of platform competition and switching costs, network externalities, and pricing in two-sides markets is introduced.
- Second, an applications to the antitrust and regulatory issues are considered.
- Third, issues related to the specific online multi-sided industries are covered.
- Familiarize students with the concepts of platform competition and switching costs, network externalities, and pricing in two-sides markets
- Provide students with analytical approaches to analyzing competition policy on the two-sided markets.
- Familiarize students with the economics of specific multi-sided industries (online search engines, online advertising).
- Basic analytical concepts for markets with online platform- market intermediation and definition of a two-sided market; - direct and indirect network externalities; - singlehoming and multihoming
- Internet platform market structures: platforms, dealers, matchmakers- market intermediation: dealing vs decentralized trade; intermediary as a platform vs intermediary as a dealer; - online platforms as matchmakers: “winner-takes-it-all” and “divide-and-conquer” at equilibrium
- Pricing and competition at two-sided platform markets- network externalities and “chicken and egg“ problem; - model of a monopoly on a two-sided market; - model of a duopoly on a two-sided market; - model of a competitive bottleneck
- Antitrust regulation of two-sided platform markets- market definition and market power; - exercise of unilateral market power; - mergers and coordination practices; - other antitrust issues
- Search engines, online media, and advertising- online media platforms and advertising; - model of online platforms as gatekeepers; - search engines and sponsored search auctions
- Asymmetric information and information design at internet platform markets- online platforms with uncertainty regarding the types of buyers and sellers; - optimal information design for online platform markets
- Interim assessment (3 module)0.1 * Homework assignment + 0.3 * In-class test + 0.6 * Written exam
- Tirole, J. (1988). The Theory of Industrial Organization. Cambridge, Mass: The MIT Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=nlebk&AN=11386
- Armstrong, M. (2006). Competition in two-sided markets. RAND Journal of Economics (Wiley-Blackwell), 37(3), 668–691. https://doi.org/10.1111/j.1756-2171.2006.tb00037.x
- Rochet, J.-C., & Tirole, J. (2003). Platform Competition in Two-Sided Markets. Journal of the European Economic Association, 1(4), 990–1029. https://doi.org/10.1162/154247603322493212