Armstrong meets Rochet–Tirole: On the equivalence of different pricing structures in two-sided markets

Pricing on monopoly online trading platform with heterogeneous trading behavior and the long tail

“…Rochet and Tirole (2006) (RT2006) unify RT2003 and Armstrong (2006) by considering both heterogeneous membership externalities and usage externalities and derive the optimal pricing structure in a form similar to the Lerner formula. Bajo-Buenestado and Kinateder’s (2019) results show that the lump-sum fees in Armstrong (2006) and the per-interaction fees in RT2003 are not equivalent with price distortions. Reisinger’s (2014) research considers both the heterogeneity and the effect of network.…”

A theoretical analysis on two‐sided duopoly platforms and tax regimes

“…In case of e‐commerce platforms, buyer often pays a one‐time fee (e.g., Amazon's prime membership) and does not have to count any additional fee every time he/she enters into a transaction with sellers (Xue et al, 2019). In case of per‐transaction tax imposed on platforms, a platform may charge a membership fee to consumers as this fee would provide consumers with additional benefits, such as access to premium features or services, at no additional cost (Bajo‐Buenestado & Kinateder, 2019). On the other hand, in a marketplace involving different products that vary largely in their costs, platforms prefer to charge transaction‐based fees to sellers due to its competition‐relaxing effect (Muthers & Wismer, 2022; Wang & Wright, 2018).…”

“…The study by Kind et al (2008) investigates the optimal supply and taxation of goods in the presence of two-sidedness of the markets for the monopoly market structure. While the studies by Bajo-Buenestado and Kinateder (2019) and Kind et al (2008) look at the separate issues of tax structure than our model using a monopoly platform, we employ duopoly platform framework to analyze three different tax structures. The work by Belleflamme and Toulemonde (2018) analyses different kinds of taxes on competing platforms and shows specific taxes are completely shifted to the taxed side; other group and platforms remain unaffected whereas transaction taxes affect both sides negatively and platforms positively.…”

“…However, few scholarly articles that existed in the literature, explained tax effects in different setups and settings than our analysis. Bajo‐Buenestado and Kinateder (2019) using a monopoly platform model with the ad valorem taxes imposed on platform and end‐users, derive that the existence of price distortions (like, taxes) for a monopoly platform makes lump‐sum access fees and usage fees not replaceable for each other. Bacache‐Beauvallet (2018) studies the consequences of digital marketing on tax competition and compares origin‐based and destination‐based taxation.…”