Price Discrimination in Two‐Sided Markets

19 Pages Posted: 15 Nov 2013

See all articles by Qihong Liu

Qihong Liu

University of Oklahoma - Department of Economics

Konstantinos Serfes

Drexel University

Multiple version iconThere are 2 versions of this paper

Date Written: Winter 2013

Abstract

We examine the profitability and welfare implications of targeted price discrimination (PD) in two‐sided markets. First, we show that equilibrium discriminatory prices exhibit novel features relative to discriminatory prices in one‐sided models and uniform prices in two‐sided models. Second, we compare the profitability of perfect PD, relative to uniform prices in a two‐sided market. The conventional wisdom from one‐sided horizontally differentiated markets is that PD hurts the firms and benefits consumers, prisoners' dilemma. We show that PD, in a two‐sided market, may actually the competition. Our results suggest that the conventional advice that PD is good for competition based on one‐sided markets may not carry over to two‐sided markets.

Suggested Citation

Liu, Qihong and Serfes, Konstantinos, Price Discrimination in Two‐Sided Markets (Winter 2013). Journal of Economics & Management Strategy, Vol. 22, Issue 4, pp. 768-786, 2013. Available at SSRN: https://ssrn.com/abstract=2354751 or http://dx.doi.org/10.1111/jems.12038

Qihong Liu (Contact Author)

University of Oklahoma - Department of Economics ( email )

Norman, OK 73019-2103
United States
405-325-5846 (Phone)

HOME PAGE: http://qliu.oucreate.com

Konstantinos Serfes

Drexel University ( email )

3220 Market Street
Philadelphia, PA 19104
United States
215-895-6816 (Phone)
215-571-4670 (Fax)

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