Discussion paper

DP15204 The tension between market shares and profit under platform competition

We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This platform enjoys a competitive advantage on one or both sides. Our finding raises further doubts on using market shares as a measure of market power in platform markets.

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Citation

Belleflamme, P, M Peitz and E Toulemonde (2020), ‘DP15204 The tension between market shares and profit under platform competition‘, CEPR Discussion Paper No. 15204. CEPR Press, Paris & London. https://cepr.org/publications/dp15204