Identifying Two-Sided Markets

Abstract

†We review the burgeoning literature on two-sided markets focusing on the different definitions that have been proposed. In particular, we show that the well-known definition given by Evans is a particular case of the more general definition proposed by Rochet and Tirole. We then identify the crucial elements that make a market two-sided and, drawing from both theory and practice, derive suggestions for the identification of the two-sided nature of a market. Our suggestions are relevant not only for the analysis of traditional two-sided markets, such as newspapers and payment cards, but also for the analysis of many new markets, such as those for online social networks, online search engines and Internet news aggregators. JEL codes: L40, L50, K21

The Digital Services Tax as a Tax on Location-Specific Rent

“…It is useful to distinguish between two types of two-sided markets: non-transaction and transaction type (Filistrucchi et al, 2013). A classic example of the former is media (either physical or internet-based): an interaction between users on two sides is present but not observable; hence a membership is feasible but not fees per transaction/interaction.…”

“…Then it does not matter how the entry fee of $10 is split between them. (Filistrucchi et al, 2013) the platform to register "clicks"; each click is an interaction between two users on the opposite sides of the platform. 17 Thus, it is a transaction-type market, and the platform can charge usage fee, in addition to the access (membership) fee.…”

Competition policy reform in Europe and Germany – institutional change in the light of digitization

“…Usually, transaction platforms are distinguished from non-transaction platforms (Affeldt et al 2013;Filistrucchi et al 2013a;Damme et al 2010;Filistrucchi 2008). In the first case, transactions are directly concluded via the platform or are at least directly observable by it (as, for instance, in the case of Ebay).…”

Quantity and Quality of Work in the Platform Economy

“…The technology of the platforms and its conceptual implications 'Two-sided or multi-sided markets or platforms are situations where a platform enables two or more groups of users to transact or at least interact in ways that at least one group and usually all groups benefit directly or indirectly from having a growing number of users on the other side(s)' (Codagnone et al 2019: p 18). Since 2002 (see, for example, Rochet & Tirole 2003Parker & Van Alstyne, 2000Eisenmann et al, 2006;Rysman, 2009), a growing body of economic literature has analysed situations that broadly qualify as two-sided markets (henceforth 2SMs), although the conditions for two-sidedness (or multi-sidedness) still remain an empirical matter to be ascertained case by case (Filistrucchi, et al 2013;Filistrucchi et al, 2014).…”

“…They study cases where the two sides cannot coordinate and there is no possibility of pass-through in that the amount charged on one side cannot be translated onto the other. On the contrary, Armstrong (2006), Evans (2003), Evans & Schmalensee (2007), and more recently Filistrucchi et al (2013) consider the more general case where network effect can exist on only one side of the market, and both 'membership' (access) and 'transaction' (usage) are used. In this setup, the important thing is that having one side coordinated by an intermediary is more efficient than by bilateral relationship.…”