Platform Competition in Two-Sided Markets

Platform Competition INTWO- sided MARKETSJean-Charles RochetUniversite de Toulouse,Institut D Economie IndustrielleJeanTiroleInstitut D Economie Industrielle,Centre d Etudes et de Recherches enAnalyse Socio-EconomiqueAbstractMany if not most Markets with network externalities are Two-Sided . To succeed, platforms inindustries such as software, portals and media, payment systems and the Internet, must getboth sides of the market on board. Accordingly, platforms devote much attention to theirbusiness model, that is, to how they court each side while making money overall. This paperbuilds a model of Platform Competition with Two-Sided Markets . It unveils the determinantsof price allocation and end-user surplus for different governance structures (pro t-maximiz-ing platforms and not-for-pro t joint undertakings), and compares the outcomes with thoseunder an integrated monopolist and a Ramsey planner.

lem, two-sided markets have received scant attention. The purpose of this paper is to start ” lling this gap. The recognition that many markets are multisided leads to new and inter-esting positive and normative questions. Under multisidedness, platforms must choose a price structure and not only a price level for their service. For example,

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