Antitrust and Competition in Two-Sided Markets
32 Pages Posted: 19 Sep 2007 Last revised: 7 Jul 2011
Date Written: August 31, 2007
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: Suggested Citation