Multi-sided Markets Research Articles

Market Definition and Multi-Sided Markets: A Primer on the 2024 EU Market Definition Notice

Market Definition and Multi-Sided Markets: A Primer on the 2024 EU Market Definition Notice

Ascending-price mechanism for general multi-sided markets

We present an ascending-price mechanism for a multi-sided market with a variety of participants, such as manufacturers, logistics agents, insurance providers, and assemblers. Each deal in the market may consist of a combination of agents from separate categories, and different such combinations are simultaneously allowed. This flexibility lets multiple intersecting markets be resolved as a single global market. Our mechanism is obviously-truthful, strongly budget-balanced, individually rational, and attains almost the optimal gain-from-trade when the market for every allowed combination of categories is sufficiently large. We evaluate the performance of the suggested mechanism with experiments on real stock market data and synthetically produced data.

On Contractual Power of Digital Platforms

Digital markets and platforms are increasingly important in commercial life, and the way contracts are formed between users and platforms in multi-sided markets raise many important legal issues. This article interrogates the nature of multi-sided market contracting, and raises questions regarding the binding of users to standard terms, especially extensive limitations of liability. Platforms also govern the terms between supply and demand sides, many of which are standardised and not necessarily bargained for by users on the platform. This gatekeeper role should entail a heightened level of responsibility. Digital markets, platforms, gatekeepers, contractual formation, contractual exclusions, limitations of liability

Prices and Mergers in a General Model of Multi-Sided Markets

Prices and Mergers in a General Model of Multi-Sided Markets

Quality Differentiation and Optimal Pricing Strategy In Multi-Sided Markets

This paper analyzes the generalized quality differentiation model in multi-sided markets with positive externalities, which leads to new insights into the optimal pricing structure of the firm. We find that quality differentiation for users on one side affects not only the side involving differentiation but also the other side due to cross-side network externalities, thereby affecting the pricing structure of multi-sided firms. In addition, quality differentiation affects the strategic relationships among all the choice variables for the platform, enabling the platform to strategically use quality differentiation to raise its profits.

Regulation of Narrow Price Parity Agreements in Multi-Sided Markets

The article discusses the regulatory regime of digital multi-sided markets. It analyzes narrow price parity clauses designed to prevent a showrooming by depriving the supplier of the right to offer lower rates on its own website than on the platform. In recent years, some EC countries have banned such agreements. It was justified by the perceived benefits of increased vertical competition between suppliers and platforms acting as their distributors. The paper considers the interaction between the supplier and a platform like Booking.com, in the presence of narrow price parity clauses and without them. It is shown that the bans of such agreements may have long-run consequences radically different from the original intentions of the regulator. The reason for this is the reaction of the platform suppressing vertical competition by intensifying competition between the former and the newly attracted suppliers (apartment owners). The resulting uberization of the industry complicates the traditional suppliers (hotels) reproduction processes and negatively affects the welfare of consumers. The inefficiency of the existing regulatory regime of digital multi-sided markets leading to concentration of revenues in the hands of transaction platforms suggest that there is an urgent need to form national platforms, whose function should be to support domestic suppliers, create industry infrastructure, etc…

Data Processing as an Abuse of Market Power in Multi-Sided Markets – The More Competition-Oriented Approach in the German Federal Supreme Court’s Interim Decision KVR 69/19 – Facebook

Abstract The relationship between competition law and data protection law has been a highly controversial issue following the German Competition Authority’s (Bundeskartellamt, hereinafter ‘Competition Authority’) decision with regard to Facebook’s data processing policy. The Competition Authority’s theory of harm was centered around an exploitative abuse of market power through the imposition of a data processing policy which is in conflict with the data protection rules. In the interim court proceedings, the OLG Düsseldorf criticized the Competition Authority’s decision. The German Federal Supreme Court (Bundesgerichtshof, hereinafter ‘Federal Supreme Court’) upheld the Competition Authority’s decision. However, the Federal Supreme Court did not derive the exploitative abuse primarily from a mere violation of data protection law. Instead, the Court referred to the users’ lack of freedom of choice. The Court developed a modified theory of harm by identifying elements of an exploitative abuse but also of an exclusionary abuse. The Court’s line of argument is more competition-oriented and accounts for the particular economic features of multi-sided markets. In this line of reasoning, an actual violation of the data protection rules is not a necessary prerequisite for finding a violation of competition law.

Standard of Causality in Abuse of Dominance Cases Regarding Terms and Conditions in Multi-Sided Markets

Facebook

Professional Clubs as Platforms in Multi-Sided Markets in Times of COVID-19: The Role of Spectators and Atmosphere in Live Football

In-stadium spectators affect the emotional value and atmosphere of sport live broadcasts. Due to the COVID-19 pandemic, in Europe, the presence of in-stadium spectators, however, was suspended until further notice. Conceptualizing professional clubs as economic platforms, network effects due to the lack of in-stadium spectators may affect stakeholders’ utility. Thus, the main aims of this study are to examine the influence of missing in-stadium spectators for professional clubs by investigating network effects on (1) TV viewers’ emotional arousal and (2) TV viewers’ attention towards sponsor messages during live football broadcasts. Using a quantitative research design, a controlled lap was conducted, and broadcasts were presented to n = 26 highly involved participants. Heart rate, eye-tracking, and betting odds data served as measurements of arousal, attention, and game outcome uncertainty and were aggregated on a second-by-second basis (k = 140,400). Multilevel regression analysis showed significant differences in viewers’ arousal and attention to sponsors, contingent on the presence of in-stadium spectators and game outcome uncertainty. The presence of in-stadium spectators increased arousal, while attention towards sponsor messages decreased, depending on game outcome uncertainty. Based on the presence of network effects, implications to sustainably adapting professional football clubs’ business models based on stakeholders’ different interests can be given.

Quality Differentiation and Optimal Pricing Strategy in Multi-Sided Markets

Quality Differentiation and Optimal Pricing Strategy in Multi-Sided Markets

The Nature of the Evidence Needed to Prove Countervailing Benefits and What Can Be Considered a Fair Share to Consumers in Multisided Markets

The Nature of the Evidence Needed to Prove Countervailing Benefits and What Can Be Considered a Fair Share to Consumers in Multisided Markets GRUR International, Volume 69, Issue 12, December 2020, Pages 1272–1286, https://doi.org/10.1093/grurint/ikaa126 Published: 21 October 2020

Quality Differentiation and Optimal Pricing Strategy in Multi-sided Markets

This paper analyzes the generalized quality differentiation model in multi-sided markets with positive externalities, which leads to new insights into the optimal pricing structure of the firm. We find that quality differentiation for users on one side leads to a decrease in the price charged to users on the other side due to cross-subsidization, thereby affecting the pricing structure of multi-sided firms. In addition, quality differentiation affects the strategic relationships among the choice variables for the platform, so that the platform strategically uses quality differentiation to raise its profits.

The Effects of Competition and Entry in Multi-sided Markets

AbstractWe study price competition and entry of platforms in multi-sided markets. Utilizing the simplicity of the equilibrium pricing formula in our setting with heterogeneity of customers’ membership benefits, we demonstrate that in the presence of externalities, the standard effects of competition can be reversed: as platform competition increases, prices, and platform profits can go up and consumer surplus can go down. We identify economic forces that jointly determine the social inefficiency of the free-entry equilibrium and provide conditions under which free entry is socially excessive as well as an example in which free entry is socially insufficient.

Digital Platform Strategies: Strategic Trade-Offs in Multi-Sided Markets

Research on digital platforms has proliferated in recent years. While some studies have started to analyze the strategies of digital platform firms, we still have an incomplete understanding of the strategic trade-offs digital platforms face. Part of the reason is that conventional strategic trade-offs such as cost vs. quality leadership, first mover vs. follower advantage, and make vs. buy decisions are often inapplicable to platform providers because complementors typically control the majority of platform services (including their quality and cost), network effects punish late entry, and the market-hierarchy duopoly does not exist for firms that create their own markets. In response to these paradigmatic shifts, we introduce a conceptual framework based on the idea that digital platforms face a fundamental trade-off between diffusion and differentiation. We then translate this idea to the multi-sided context of digital platforms and discuss the implications of the diffusion-differentiation trade-off for a platform’s supply, demand, and rival sides. We also elaborate on two factors that influence platforms’ positioning regarding this trade-off: resource availability and timing of market entry. Our paper contributes to the emerging scholarship on digital platforms by introducing a multi-sided generic strategy framework and typology for the analysis of platform firms’ strategic positioning.

An old friend is better than two new ones? <i>Approaches to market research in the context of digital transformation for the antitrust laws enforcement</i>

Digital transformation has led to changes in business models of traditional players in the existing markets. What is more, new entrants and new markets appeared, in particular platforms and multisided markets. The emergence and rapid development of platforms are caused primarily by the existence of so called indirect network externalities. Regarding to this, a question arises of whether the existing instruments of competition law enforcement and market analysis are still relevant when analyzing markets with digital platforms? This paper aims at discussing advantages and disadvantages of using various tools to define markets with platforms. In particular, we define the features of the SSNIP test when being applyed to markets with platforms. Furthermore, we analyze adjustment in tests for platform market definition in terms of possible type I and type II errors. All in all, it turns out that to reduce the likelihood of type I and type II errors while applying market definition technique to markets with platforms one should consider the type of platform analyzed: transaction platforms without pass-through and non-transaction matching platforms should be tackled as players in a multisided market, whereas non-transaction platforms should be analyzed as players in several interrelated markets. However, if the platform is allowed to adjust prices, there emerges additional challenge that the regulator and companies may manipulate the results of SSNIP test by applying different models of competition.

Strongly Budget Balanced Auctions for Multi-Sided Markets

In two-sided markets, Myerson and Satterthwaite's impossibility theorem states that one can not maximize the gain-from-trade while also satisfying truthfulness, individual-rationality and no deficit. Attempts have been made to circumvent Myerson and Satterthwaite's result by attaining approximately-maximum gain-from-trade: the double-sided auctions of McAfee (1992) is truthful and has no deficit, and the one by Segal-Halevi et al. (2016) additionally has no surplus — it is strongly-budget-balanced. They consider two categories of agents — buyers and sellers, where each trade set is composed of a single buyer and a single seller.The practical complexity of applications such as supply chain require one to look beyond two-sided markets. Common requirements are for: buyers trading with multiple sellers of different or identical items, buyers trading with sellers through transporters and mediators, and sellers trading with multiple buyers. We attempt to address these settings.We generalize Segal-Halevi et al. (2016)'s strongly-budget-balanced double-sided auction setting to a multilateral market where each trade set is composed of any number of agent categories. Our generalization refines the notion of competition in multi-sided auctions by introducing the concepts of external competition and trade reduction. We also show an obviously-truthful implementation of our auction using multiple ascending prices.Full version, including omitted proofs and simulation experiments, is available at https://arxiv.org/abs/1911.08094.

Burdens and Balancing in Multisided Markets: The First Principles Approach of Ohio v. American Express

Multisided platforms have distinct and critical features that set them apart from single-sided markets. This realization has led to a split among courts, antitrust practitioners, and economists as to the best method to assess whether mergers or conduct that involve platforms result in the creation or maintenance of monopoly power and violate the antitrust laws. Some argue that each side of a platform constitutes a separate relevant product market. Others argue for a single, integrated market that incorporates all sides. We argue that any prima facie antitrust assessment of competitive harm must incorporate the impact to consumers on all sides regardless of market definition. We also explain why output effects should be the primary emphasis of competitive effects analyses. The Supreme Court recently and correctly adopted this approach in Ohio v. American Express.

Burdens and Balancing in Multisided Markets: The First Principles Approach of Ohio v. American Express

Burdens and Balancing in Multisided Markets: The First Principles Approach of Ohio v. American Express

Multisided Markets and Platform Dominance

Facebook and Google and other internet giants are multisided markets (MSM). The user-side of the market, prices are zero—“free.” On the other side of the market, Facebook’s and Google’s revenues are derived from advertising which appears when the users click on advertisers’ web sites. They can extract exorbitant prices for ads, since they are the only source that can target ads directly to potential customers with laser-like focus to produce enormous monopoly rents. This monopolistic aspect of the internet giants is addressed in the Chapter. Monopoly pricing is not well defined in multisided markets. The paper examines non-transactional multisided markets for their ability to create consumers’ harm. Estimates of Google’s and Facebook’s social cost in terms of consumers’ welfare loss are $54 and $33 billion, respectively, for a total cost of at least 87 billion dollars. The dominant internet platforms can create three major harms to consumers: Increasing prices to consumers via added costs to the products being advertised, Elimination (or non-emergence) of competition in markets to the products being advertised, Increasing prices to consumers beyond the cost of advertising via the market power of the remaining firms in the market of the products being advertised.

Multi-Sided Markets for Transforming Healthcare Service Delivery.

Changes in healthcare delivery needs have necessitated the design of new models for connecting providers and consumers of services. While healthcare delivery has traditionally been a push market, multi-sided markets offer the potential for transitioning to a pull market for service delivery. However, there is a need to better understand the business model for multi-sided markets as a first step to using them in healthcare. This paper addressed that need and describes a multi-sided market evaluation framework. Our framework identifies patient, governance and service delivery as three levels of brokerage consideration for evaluating multi-sided markets in healthcare.