Upward Pricing Pressure in Two-Sided Markets
TILEC Discussion Paper No. 2012-029
CentER Discussion Paper Series No. 2012-069
28 Pages Posted: 23 Jul 2012 Last revised: 29 Aug 2012
Date Written: July 23, 2012
Abstract
Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.
Keywords: merger evaluation, two-sided markets, network effects, UPP
JEL Classification: L13, L40, L82
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry
-
Insulated Platform Competition
By Alexander White and E. Glen Weyl
-
Platform Pricing at Sports Card Conventions
By Ginger Zhe Jin and Marc Rysman
-
The First-Order Approach to Merger Analysis
By Sonia Jaffe and E. Glen Weyl
-
By Lapo Filistrucchi, Tobias J. Klein, ...
-
Estimating Platform Market Power in Two-Sided Markets with an Application to Magazine Advertising
By Minjae Song
-
Merger Simulation in a Two-Sided Market: The Case of the Dutch Daily Newspapers
By Lapo Filistrucchi, Tobias J. Klein, ...
-
By David S. Evans and Michael D. Noel
-
By David S. Evans and Michael D. Noel