Defining Markets that Involve Multi-Sided Platform Businesses: An Empirical Framework With an Application to Google's Purchase of DoubleClick
46 Pages Posted: 7 Nov 2007 Last revised: 25 Oct 2012
Date Written: November 6, 2007
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.
JEL Classification: K21, K41, L11, L40, L41
Suggested Citation: Suggested Citation