Two-Sided Markets and Electronic Intermediaries

Abstract

The object of this paper is to discuss on-line intermediation from the perspective of two-sided markets. It builds a simple model of the intermediation activity when trading partners are involved in a commercial relationship and uses it to illustrate some of the results that emerge in the two-sided market literature, as well as to discuss some new aspects. The first part concentrates on a monopoly intermediation service and discusses both efficient pricing and monopoly pricing. The second part discusses the nature of competition between intermediaries, addressing issues as competitive cross subsidies, multi-homing or tying.

Keywords: intermediation, two-sided market, network, cross-subsidy, tying

JEL Classification: D4, D85, L12, L13, L14, L40