Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25821
Authors: 
Schmidtke, Richard
Year of Publication: 
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

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