Negative Intra-Group Externalities in Two-Sided Markets

41 Pages Posted: 14 Jun 2007

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Eric Toulemonde

IZA Institute of Labor Economics; Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences

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Date Written: June 2007

Abstract

Two types of agents interact on a pre-existing free platform. Agents value positively the presence of agents of the other type but may value negatively the presence of agents of their own type. We ask whether a new platform can find fees and subsidies so as to divert agents from the existing platform and make a profit. We show that this might be impossible if intra-group negative externalities are sufficiently (but not too) strong with respect to positive inter-group externalities.

Keywords: two-sided markets, naked exclusion, divide and conquer

JEL Classification: L11, L13, L23

Suggested Citation

Belleflamme, Paul and Toulemonde, Eric, Negative Intra-Group Externalities in Two-Sided Markets (June 2007). CESifo Working Paper No. 2011. Available at SSRN: https://ssrn.com/abstract=993673

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Eric Toulemonde

IZA Institute of Labor Economics ( email )

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