Defining Markets that Involve Multi-Sided Platform Businesses: An Empirical Framework with an Application to Google's Purchase of DoubleClick
David S. Evans
University of Chicago Law School; University College London; Global Economics Group
Michael D. Noel
University of California, San Diego
November 2007
Reg-Markets Center Working Paper No. 07-18
Abstract:
A multi-sided platform (MSP) serves as an intermediary for two or more groups of customers who are linked by indirect network effects. Recent research has found that MSPs are significant in many industries and that some standard economic results - such as the Lerner Index - do not apply to them, in material ways, without some significant modification to take linkages between the multiple sides into account. This article extends several key tools used for the analysis of mergers to situations in which one or more of the suppliers are MSPs. It shows that the application of traditional tools to mergers involving MSPs results in biases the direction of which depends on the particular tool being used and other conditions. It also extends these tools to the analysis of the merger of MSPs. The techniques are illustrated with an application to an acquisition by Google in the online advertising industry.
Number of Pages in PDF File: 47
working papers series
Suggested Citation
Evans, David S. and Noel, Michael D., Defining Markets that Involve Multi-Sided Platform Businesses: An Empirical Framework with an Application to Google's Purchase of DoubleClick (November 2007). Reg-Markets Center Working Paper No. 07-18. Available at SSRN: http://ssrn.com/abstract=1089073 or http://dx.doi.org/10.2139/ssrn.1089073
