Collusion in Two-Sided Markets

49 Pages Posted: 10 Oct 2017

See all articles by Yassine Lefouili

Yassine Lefouili

University of Toulouse 1 - Toulouse School of Economics (TSE)

Joana Pinho

Catholic University of Portugal (UCP) - Católica Porto Business School

Date Written: September 30, 2017

Abstract

This paper explores the incentives for, and the effects of, collusion in prices between two-sided platforms. We characterize the most profitable sustainable agreement when platforms collude on both sides of the market and when they collude on a single side of the market. Under two-sided collusion, prices on both sides are higher than competitive prices, implying that agents on both sides become worse off as compared to the competitive outcome. An increase in cross-group externalities makes two-sided collusion at a given profit level harder to sustain, and reduces the harm from collusion suffered by the agents on a given side as long as the collusive price on that side is lower than the monopoly price. When platforms collude on a single side of the market, the price on the collusive side is lower (higher) than the competitive price if the magnitude of the cross-group externalities exerted on that side is sufficiently large (small). As a result, one-sided collusion may benefit the agents on the collusive side and harm the agents on the competitive side.

Keywords: Collusion; Two-Sided Markets; Cross-Group Externalities

JEL Classification: L41; D43

Suggested Citation

Lefouili, Yassine and Pinho, Joana, Collusion in Two-Sided Markets (September 30, 2017). NET Institute Working Paper No. 17-05, Available at SSRN: https://ssrn.com/abstract=3049356 or http://dx.doi.org/10.2139/ssrn.3049356

Yassine Lefouili (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Joana Pinho

Catholic University of Portugal (UCP) - Católica Porto Business School ( email )

Rua de Diogo Botelho 1327
Porto, Porto 4169-005
Portugal
+351 22 619 6200 (Phone)

HOME PAGE: http://https://sites.google.com/site/joanapinhoecon/

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