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Discussion Paper Details

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Title: Platform Ownership

Author(s): Volker Nocke, Martin Peitz and Konrad O Stahl

Publication Date: October 2004

Keyword(s): intermediation, network effects, product diversity and two-sided markets

Programme Area(s): Industrial Organization

Abstract: We develop a general theoretical framework of trade on a platform on which buyers and sellers interact. The platform may be owned by a single large, or many small independent or vertically integrated intermediaries. There also may be free entry into the market for platform slots, or platform owners my form a club that restricts entry. We provide a positive and normative analysis of the impact of platform ownership structure on platform size. The strength of network effects is important in the ranking of ownership structures by induced equilibrium platform size and welfare. We develop an intuitive taxonomy of these towards developing our results. We show that while vertical integration may be welfare-enhancing if network effects are weak, monopoly platform ownership is socially preferred if they are strong. These are also the ownership structures likely to emerge.

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Bibliographic Reference

Nocke, V, Peitz, M and Stahl, K. 2004. 'Platform Ownership'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4657