Two-Sided Markets with Pecuniary and Participation Externalities

Arbeitspapier

The existing literature on two-sided markets addresses partici- pation 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BGPE Discussion Paper ; No. 3

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets ; Entertainment; Media
• Subject: two-sided markets ; broadcasting ; advertising ; market entry ; digi- tal television

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schmidtke, Richard
• Event: Veröffentlichung
• (who): Friedrich-Alexander-Universität Erlangen-Nürnberg, Bavarian Graduate Program in Economics (BGPE)
• (where): Nürnberg
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/73329
• Last update: 10.03.2025, 11:45 AM CET