Analyzing Market Definition and Power in Multi-sided Platform Markets

45 Pages Posted: 4 Nov 2005  

Michael D. Noel

Texas Tech University

David S. Evans

Global Economics Group; University College London

Date Written: October 21, 2005

Abstract

The SSNIP test and Critical Loss Analysis are widely used tools for determining market definition in merger and sometimes other antitrust matters. However, the standard techniques used to test for a relevant antitrust market are incorrect when the firms in question operate two-sided platforms. When a two-sided platform raises price on one side of its business, it negatively impacts both sides iteratively. We show how Critical Loss Analysis can be extended to the case of two-sided platforms and drive formulas for its implementation. We perform comparative statics to show that the bias from the misuse of one-sided formulas in a two-sided setting can be large.

JEL Classification: K21, K41, L11, L40, L41

Suggested Citation

Noel, Michael D. and Evans, David S., Analyzing Market Definition and Power in Multi-sided Platform Markets (October 21, 2005). Available at SSRN: https://ssrn.com/abstract=835504 or http://dx.doi.org/10.2139/ssrn.835504

Michael D. Noel

Texas Tech University ( email )

237 Holden Hall
Box 41014
Lubbock, TX 79407
United States

David S. Evans (Contact Author)

Global Economics Group ( email )

111 Devonshire St.
Suite 900
Boston, MA 02108
United States

University College London ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

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