DP9164 Exclusionary Pricing in a Two-Sided Market
|Author(s):||Massimo Motta, Helder Vasconcelos|
|Publication Date:||October 2012|
|Keyword(s):||Demand externalities, Predation, Two-sided markets|
|JEL(s):||L11, L13, L41|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9164|
In this paper we provide a new way of modelling two-sided markets, and we then use this model to study anti-competitive conduct in an asymmetric two-sided market which captures the main features of some recent antitrust cases. We show that below-cost pricing on one market side can allow an incumbent firm to exclude a more efficient rival which does not have a customer base yet. This exclusionary behaviour is the more likely to occur the more mature the market and the stronger the established customer base of the incumbent.