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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/25821
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| Title: | | Two-sided markets with pecuniary and participation externalities  |
| Authors: | | Schmidtke, Richard |
| Issue Date: | | 2006 |
| Series/Report no.: | | CESifo working paper 1776 |
| Abstract: | | The existing literature on two-sided markets addresses participation 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. |
| JEL: | | D43 L13 L82 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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