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Market Definition in Two-Sided Markets: Theory and Practice

50 Pages Posted: 7 Jul 2013  

Lapo Filistrucchi

Tilburg University, TILEC; University of Florence, Dipartimento di Scienze Economiche

Damien Geradin

Tilburg Law & Economics Center (TILEC); University College London - Faculty of Laws

Eric van Damme

TILEC and CentER, Tilburg University

Pauline Affeldt

German Institute for Economic Research (DIW Berlin); Technische Universität Berlin (TU Berlin)

Date Written: March 16, 2013

Abstract

Drawing from the economics of two-sided markets, we provide suggestions for the definition of the relevant market in cases involving two-sided platforms, such as media outlets, online intermediaries, payment cards companies and auction houses. We also discuss when a one-sided approach may be harmless and when instead it can potentially lead to a wrong decision. We then show that the current practice of market definition in two-sided markets is only in part consistent with the above suggestions. Divergence between our suggestions and practice is due to the failure to fully incorporate the lessons from the economic theory of two-sided markets, to the desire to be consistent with previous practice and to the higher data requirements and the higher complexity of empirical analysis in cases involving two-sided platforms. In particular, competition authorities have failed to recognize the crucial difference between two-sided transaction and non-transaction markets and have been misled by the traditional argument that where there is no price, there is no market.

Keywords: two-sided markets, two-sided platforms, market definition, SSNIP test

JEL Classification: L40, L50, K21

Suggested Citation

Filistrucchi, Lapo and Geradin, Damien and van Damme, Eric and Affeldt, Pauline, Market Definition in Two-Sided Markets: Theory and Practice (March 16, 2013). TILEC Discussion Paper No. 2013-009; Tilburg Law School Research Paper No. 09/2013. Available at SSRN: https://ssrn.com/abstract=2240850 or http://dx.doi.org/10.2139/ssrn.2240850

Lapo Filistrucchi (Contact Author)

Tilburg University, TILEC ( email )

P.O. Box 90153
Tilburg, Noord-Brabant NL-5000 LE
Netherlands
+31 13 466 3360 (Phone)
+31 13 466 3042 (Fax)

HOME PAGE: http://www.lapofilistrucchi.com

University of Florence, Dipartimento di Scienze Economiche ( email )

via delle Pandette 9
Florence, Florence IT-50127
Italy
+39 055 2759579 (Phone)
+39 055 2759910 (Fax)

HOME PAGE: http://www.lapofilistrucchi.com

Damien Geradin

Tilburg Law & Economics Center (TILEC)

Tilburg, 5000 LE
Netherlands

University College London - Faculty of Laws ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

Eric E.C. Van Damme

TILEC and CentER, Tilburg University ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 3045 (Phone)
+31 13 466 3066 (Fax)

Pauline Affeldt

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

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