Why the Claim that Markets with Two-Sided Platforms Become One-Sided When They Mature is Wrong

32 Pages Posted: 27 Jul 2017

See all articles by David S. Evans

David S. Evans

Market Platform Dynamics; Berkeley Research Group, LLC

Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: July 26, 2017

Abstract

Several economists have claimed that markets in which two-sided firms compete become one-sided at maturity, when everyone has joined a platform. That is, they assert that in mature markets policymakers, such as courts in antitrust cases, can properly exclude one side from consideration, even though both sides matter to the two-sided firms involved. One court—in U.S. Airways v. Sabre—has agreed. For the purposes of analyzing alleged anticompetitive practices by Sabre, which operates a Global Distribution Services (GDS) platform serving airlines and travel agents, the court allowed the jury to ignore the travel agent side of the platform. The Second Circuit Court of Appeals is now considering this matter. Our Amicus Brief explains why the mature market theory proposed by these economists, which is based on nothing more than assertion, is not consistent with the foundational papers on two-sided platforms, with the competitive realities faced by two-sided firms in mature markets, or with standard principles for defining relevant markets in antitrust cases.

Keywords: Two-Sided Markets, Two-Sided Platforms, Market Definition, Market Definition for Two-Sided Platforms, Multisided Platforms, Global Distribution Systems

JEL Classification: L12, L13, L41, L42, K21

Suggested Citation

Evans, David S. and Schmalensee, Richard, Why the Claim that Markets with Two-Sided Platforms Become One-Sided When They Mature is Wrong (July 26, 2017). Available at SSRN: https://ssrn.com/abstract=3009452 or http://dx.doi.org/10.2139/ssrn.3009452

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Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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