Two-Sided Markets, Competition and Exclusionary Practices

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.advisor Murto, Pauli
dc.contributor.advisor Mustonen, Mikko Keltto, Jaakko 2019-07-21T16:01:43Z 2019-07-21T16:01:43Z 2019
dc.description.abstract Markets, where two, or more, groups of agents encounter via intermediary platform and there are network externalities between those groups, can be called two-sided markets. Functioning and key characteristics of two-sided markets are described in this bachelor thesis by presenting three models of initial settings of two-sided markets provided by Armstrong (2006). As Armstrong (2006) suggests the role of i) relative size of cross-group externalities, ii) charging format and iii) agents homing decisions, whether they choose to join a single platform (single-homing) or to join multiple platforms (multi-home) turn out to be crucial in determining market outcomes. There are some limitations in models. Some modifications to account those limitations can be done more easily than others. Right format of charges and costs for platform are clearly case specific. In addition, nonnegativity constraint of prices, fixed costs and agents’ investment cost of joining platform may be considered to be included case by case. More complex questions arise, when source of agents’ decisions about single-homing and multi-homing and source of platforms’ differentiation decisions are considered. Unambiguous answers to these questions may not be reached just by some little modification of parameters. One complex issue is related to feasibility of crucial assumption in competitive bottleneck model, where agents are ‘atomistic’ and do not have market power to affect other group’s decisions by their own decisions. Most importantly it turns out that the format used for determining utility and agent heterogeneity within model are crucial factors in two-sided market models having implications also for endogeneity of agents’ decisions about joining single or multiple platforms. From competition policy point of view, it is useful to pay attention to exclusionary practices, which platforms may have incentive to use to reach dominant position. Existing literature suggests a bit different approaches for assessment of dominance in the context of two-sided markets. Predatory pricing seems even more complicated to detect than in one-sided markets because in two-sided markets price on one side do not reflect only costs incurred from that side but also relative cross-group externalities between groups. Exclusive contracts set by platforms to persuade agents to abandon rival platform may turn around the way, in which total surplus is shared between groups of agents and platform. en
dc.format.extent 23
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title Two-Sided Markets, Competition and Exclusionary Practices en
dc.type G1 Kandidaatintyö fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Taloustieteen laitos fi
dc.subject.keyword two-sided markets en
dc.subject.keyword platform competition en
dc.subject.keyword exclusive contracts en
dc.subject.keyword cross-group externalities en
dc.subject.keyword indirect network effects en
dc.subject.keyword exclusionary practices en
dc.subject.keyword platform economics en
dc.identifier.urn URN:NBN:fi:aalto-201907214372
dc.type.ontasot Bachelor's thesis en
dc.type.ontasot Kandidaatintyö fi
dc.programme Taloustiede en

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