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Antitrust in Two-Sided Markets: Is Competition Always Desirable?

Berkeley Program in Law and Economics Working Paper

20 Pages Posted: 27 Nov 2010  

Ingo Fiedler

University of Hamburg - Institute of Commercial Law

Date Written: October 25, 2010

Abstract

The main objective of antitrust interventions is to assure competition in markets to benefit consumers. This paper challenges this common approach by examining the case of a satellite broadcasting network with monopoly power. First, satellite TV is identified as a two-sided market. It is then analyzed in the framework of the canonical model for two-sided markets developed by Rochet & Tirole (2004). The main finding is that the satellite network maximizes his profits by choosing a price formation which maximizes the overall welfare of all market participants. Even if the satellite network uses his monopoly power to introduce a fee to receive satellite TV, it would do so only until the semi-elasticity of the amount of consumers in regard to the per-interaction-price equals the one of the TV stations – exactly the point where welfare is maximized. It is therefore concluded that antitrust cases have to take a more in-depth look at two-sided markets before deciding that competition is best for consumers.

Keywords: Antitrust, Two-Sided Markets, Competition, Broadcasting, Welfare

JEL Classification: L40, D41

Suggested Citation

Fiedler, Ingo, Antitrust in Two-Sided Markets: Is Competition Always Desirable? (October 25, 2010). Berkeley Program in Law and Economics Working Paper. Available at SSRN: https://ssrn.com/abstract=1715982 or http://dx.doi.org/10.2139/ssrn.1715982

Ingo Fiedler (Contact Author)

University of Hamburg - Institute of Commercial Law ( email )

Max-Brauer-Allee 60
Hamburg, 22765
Germany
+4940428386539 (Phone)
+4940428386443 (Fax)

HOME PAGE: http://www.wiso.uni-hamburg.de/institute/irdw

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