Competition in Two-Sided Markets: The Antitrust Economics of Payment Card Interchange Fees

56 Pages Posted: 9 Jul 2011

See all articles by Andres V. Lerner

Andres V. Lerner

Compass Lexecon

Kevin M. Murphy

University of Chicago; National Bureau of Economic Research (NBER)

Lacey Plache

Navigant Consulting, Inc. - LECG

Benjamin Klein

University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon

Date Written: 2006

Abstract

Standard economics provides a well-understood framework of the competitive determinants of market prices that is now widely accepted for antitrust analysis. In “two-sidedmarkets,” where firms supply products demanded by two interrelated groups of consumers, these competitive forces operate in a somewhat more complex way and understanding the antitrust implications requires extending the standard framework. For example, a newspaper publisher faces demand from both readers and advertisers. The publisher must balance demand on the two sides of the market in determining two interrelated sets of prices, taking account of the fact that lowering subscription prices and thereby increasing readership will increase advertising prices. These “network effects” of increased readership on advertising value are what make the economic analysis unique and the antitrust implications somewhat unfamiliar.

JEL Classification: L10, K21

Suggested Citation

Lerner, Andres V. and Murphy, Kevin M. and Plache, Lacey and Klein, Benjamin, Competition in Two-Sided Markets: The Antitrust Economics of Payment Card Interchange Fees (2006). Antitrust Law Journal, Vol. 73, No. 3, 2006. Available at SSRN: https://ssrn.com/abstract=1657630

Andres V. Lerner

Compass Lexecon ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-6028
United States
310-728-2026 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/pages/bio.aspx?ID=155

Kevin M. Murphy

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7280 (Phone)
773-702-2699 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lacey Plache

Navigant Consulting, Inc. - LECG ( email )

1603 Orrington
Suite 1500
Evanston, IL 60201
United States

Benjamin Klein (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.econ.ucla.edu/people/Faculty/Klein.html

Compass Lexecon ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=152

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