Tag Archives: Two-Sided Market

一月 29 2022

Two-sided network effects: A theory of information product design

Parker, Geoffrey G., and Marshall W. Van Alstyne. “Two-sided network effects: A theory of information product design." Management science 51.10 (2005): 1494-1504. [pdf]

original Abstract

How can firms profitably give away free products? This paper provides a novel answer and articulates trade-offs in a space of information product design. We introduce a formal model of two-sided network externalities based in textbook economics—a mix of Katz and Shapiro network effects, price discrimination, and product differentiation. Externality-based complements, however, exploit a different mechanism than either tying or lock-in even as they help to explain many recent strategies such as those of firms selling operating systems, Internet browsers, games, music, and video.

The model presented here argues for three simple but useful results. First, even in the absence of competition, a firm can rationally invest in a product it intends to give away into perpetuity. Second, we identify distinct markets for content providers and end consumers and show that either can be a candidate for a free good. Third, product coupling across markets can increase consumer welfare even as it increases firm profits.

The model also generates testable hypotheses on the size and direction of network effects while offering insights to regulators seeking to apply antitrust law to network markets.

十月 29 2019

The economics of two-sided markets

Rysman, Marc. “The economics of two-sided markets." Journal of economic perspectives 23.3 (2009): 125-43. [aeaweb];[PDF][**]

==first para.==

At a local Best Buy, a child places a new Sony PlayStation 3 on the cashier’ scounter while the parents dig out their Visa card. The gaming system and the payment card may appear to have little connection other than this purchase. However, these two items share an important characteristic that is generating a series of economic insights and has important implications for strategic decision making and economic policy making. Both video game systems and payment cards are examples of two-sided markets.

十一月 25 2011

To Surcharge or Not To Surcharge? A Two-Sided Market Perspective of the No-Surcharge Rule

To Surcharge or Not To Surcharge? A Two-Sided Market Perspective of the No-Surcharge Rule
Date: 2011-08
By: Nicholas Economides (Stern School of Business, New York University)
David Henriques (Nova School of Business and Economics)
URL: http://d.repec.org/n?u=RePEc:net:wpaper:1103&r=net
In
Electronic Payment Networks (EPNs) the No-Surcharge Rule (NSR) requires
that merchants charge the same final good price regardless of the means
of payment chosen by the customer. In this paper, we analyze a
three-party model (consumers, merchants, and proprietary EPNs) to assess
the impact of a NSR on the electronic payments system, in particular,
on competition among EPNs, network pricing to merchants and consumers,
EPNs’ profits, and social welfare. We show that imposing a NSR has a
number of effects. First, it softens competition among EPNs and
rebalances the fee structure in favor of cardholders and to the
detriment of merchants. Second, we show that the NSR is a profitable
strategy for EPNs if and only if the network effect from merchants to
cardholders is sufficiently weak. Third, the NSR is socially
(un)desirable if the network externalities from merchants to cardholders
are sufficiently weak (strong) and the merchants’ market power in the
goods market is sufficiently high (low). Our policy advice is that
regulators should decide on whether the NSR is appropriate on a
market-by-market basis instead of imposing a uniform regulation for all
markets.
Keywords: Electronic Payment System, Market Power, Network
Externalities, No-Surcharge Rule, Regulation, Two-sided Markets,
MasterCard, Visa, American Express, Discover.
JEL: L13

 

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