DP16480 Two-sided Markets, Pricing, and Network Effects

Author(s): Bruno Jullien, Alessandro Pavan, Marc Rysman
Publication Date: August 2021
Date Revised: August 2021
Keyword(s): Matching, network effects, Platform, Pricing, two-sided market
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16480

The chapter has 9 sections, covering the theory of two-sided markets and related empirical work. Section 1 introduces the reader to the literature. Section 2 covers the case of markets dominated by a single monopolistic firm. Section 3 discusses the theoretical literature on competition for the market, focusing on pricing strategies that firms may follow to prevent entry. Section 4 discusses pricing in markets in which multiple platforms are active and serve both sides. Section 5 presents alternative models of platform competition. Section 6 discusses richer matching protocols whereby platforms price- discriminate by granting access only to a subset of the participating agents from the other side and discusses the related literature on matching design. Section 7 discusses identification in empirical work. Section 8 discusses estimation in empirical work. Finally, Section 9 concludes.