Competition in Two-Sided Markets: The Antitrust Economics of Payment Card Interchange Fees
Andres V. Lerner
Kevin M. Murphy
University of Chicago; National Bureau of Economic Research (NBER)
Navigant Consulting, Inc. - LECG
University of California, Los Angeles (UCLA) - Department of Economics
Antitrust Law Journal, Vol. 73, No. 3, 2006
Standard economics provides a well-understood framework of the competitive determinants of market prices that is now widely accepted for antitrust analysis. In “two-sidedmarkets,” where firms supply products demanded by two interrelated groups of consumers, these competitive forces operate in a somewhat more complex way and understanding the antitrust implications requires extending the standard framework. For example, a newspaper publisher faces demand from both readers and advertisers. The publisher must balance demand on the two sides of the market in determining two interrelated sets of prices, taking account of the fact that lowering subscription prices and thereby increasing readership will increase advertising prices. These “network effects” of increased readership on advertising value are what make the economic analysis unique and the antitrust implications somewhat unfamiliar.
Number of Pages in PDF File: 56
JEL Classification: L10, K21Accepted Paper Series
Date posted: July 9, 2011
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