Antitrust and Competition in Two-Sided Markets

32 Pages Posted: 19 Sep 2007 Last revised: 7 Jul 2011

Alexei Alexandrov

Amazon.com

George Deltas

University of Illinois at Urbana-Champaign - Department of Economics

Daniel F. Spulber

Northwestern University - Kellogg School of Management

Date Written: August 31, 2007

Abstract

This article extends antitrust analysis to two-sided markets in which a virtual monopolist competes with local bricks-and-mortar dealers. The discussion examines the market power of an Internet market maker as well as an Internet matchmaker. The analysis shows that equilibrium in a two-sided market can be characterized as a one-sided market in which transaction demand depends on the bid-ask spread of the central market maker. This allows for a straightforward extension of critical demand elasticity and critical loss analysis from one-sided markets to two-sided markets, with antitrust tests based on the hypothetical monopolist's bid-ask spread. Antitrust analysis of a one-sided market also carries over to a two-sided market with a matchmaker where antitrust tests are based on the sum of participation fees.

Keywords: antitrust, intermediaries, market-makers, matchmakers, two-sided markets

JEL Classification: L10, L13, D43

Suggested Citation

Alexandrov, Alexei and Deltas, George and Spulber, Daniel F., Antitrust and Competition in Two-Sided Markets (August 31, 2007). Simon School Working Paper No. FR 07-12. Available at SSRN: https://ssrn.com/abstract=1015411 or http://dx.doi.org/10.2139/ssrn.1015411

Alexei Alexandrov (Contact Author)

Amazon.com ( email )

Seattle, WA 98144
United States

George Deltas

University of Illinois at Urbana-Champaign - Department of Economics ( email )

1206 South Sixth Street
450 Commerce West
Champaign, IL 61820
United States
217-333-4586 (Phone)
217-244-6678 (Fax)

Daniel F. Spulber

Northwestern University - Kellogg School of Management ( email )

606 Leverone Hall
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8675 (Phone)
847-467-1777 (Fax)

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