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http://ssrn.com/abstract=2115382
 
 

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Upward Pricing Pressure in Two-Sided Markets


Pauline Affeldt


E.CA Economics

Lapo Filistrucchi


Tilburg University, Department of Economics, CentER & TILEC; University of Florence, Dipartimento di Scienze Economiche

Tobias J. Klein


Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER); Institute for the Study of Labor (IZA); Netspar; Tilburg Law and Economics Center (TILEC)

July 23, 2012

TILEC Discussion Paper No. 2012-029
CentER Discussion Paper Series No. 2012-069

Abstract:     
Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.

Number of Pages in PDF File: 28

Keywords: merger evaluation, two-sided markets, network effects, UPP

JEL Classification: L13, L40, L82

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Date posted: July 23, 2012 ; Last revised: August 29, 2012

Suggested Citation

Affeldt, Pauline and Filistrucchi, Lapo and Klein, Tobias J., Upward Pricing Pressure in Two-Sided Markets (July 23, 2012). TILEC Discussion Paper No. 2012-029. Available at SSRN: http://ssrn.com/abstract=2115382 or http://dx.doi.org/10.2139/ssrn.2115382

Contact Information

Pauline Affeldt (Contact Author)
E.CA Economics ( email )
Schlossplatz 1
Berlin, 10178
Germany
Lapo Filistrucchi
Tilburg University, Department of Economics, CentER & TILEC ( email )
P.O. Box 90153
Tilburg, Noord-Brabant NL-5000 LE
Netherlands
+31 13 466 3360 (Phone)
+31 13 466 3042 (Fax)
HOME PAGE: http://center.uvt.nl/staff/filistrucchi/
University of Florence, Dipartimento di Scienze Economiche ( email )
via delle Pandette 9
Florence, Florence IT-50127
Italy
Tobias J. Klein
Tilburg University - Department of Econometrics & Operations Research ( email )
Tilburg, 5000 LE
Netherlands
HOME PAGE: http://center.uvt.nl/staff/klein/index.html
Tilburg University - Center for Economic Research (CentER)
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
Netspar
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Tilburg Law and Economics Center (TILEC)
Warandelaan 2
Tilburg, 5000 LE
Netherlands
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