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Double Marginalization in Two-Sided Markets

E. Glen Weyl

Microsoft Research; Yale University

July 2, 2008

Should banks (through Visa) be allowed to own debit clearing networks? This problem combines the classic Cournot (1838)-Spengler (1950) double marginalization problem with the more recent literature on two-sided markets (Rochet and Tirole, 2003). Because both the double marginalization (Weyl, 2008a) and two-sided markets (Weyl, 2008b) problems depend crucially on the pass-through rate, the analysis is natural and leads to strong over-identification given simple assumptions. Vertical integration does not generally erode (and often enhances) platform mark-ups. Therefore its (price level benefits) are more robust than those of competition in two-sided markets.

Number of Pages in PDF File: 45

Keywords: two-sided markets, double marginalization, vertical relations, pass-through

JEL Classification: L42, D42, D43

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Date posted: January 8, 2009  

Suggested Citation

Weyl, E. Glen, Double Marginalization in Two-Sided Markets (July 2, 2008). Available at SSRN: https://ssrn.com/abstract=1324412 or http://dx.doi.org/10.2139/ssrn.1324412

Contact Information

Eric Glen Weyl (Contact Author)
Microsoft Research ( email )
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New York, NY 10011
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(857) 998-4513 (Phone)
HOME PAGE: http://www.glenweyl.com
Yale University ( email )
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New Haven, CT 06520-8268
United States
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