One-sided Market Research Articles

Under the microscope: Trade initiation activities around earnings and takeover announcements in a market with continuous disclosure

We examine the impact of the release time of earnings and takeover announcements on trade initiation motives on the ASX — a market with continuous disclosure. This investigation uses intraday high-frequency data of the constituent stocks of the S&P/ASX50 index and measures market sidedness around the announcements to infer trade initiation motives. We find that during a continuous trading session: (i) in a two-sided market, investors initiate both buy and sell trades just before announcements are released during trading sessions, and (ii) in a one-sided market, investors execute either buy or sell trades just after the announcements. Our results suggest that differential information is the likely motive for trade initiation just before the release of announcements. Finally, our results suggest that announcements released during continuous trading sessions are more effective in controlling information leakage.

The Core of Housing Markets from an Agent’s Perspective: Is It Worth Sprucing up Your Home?

We study housing markets as introduced by Shapley and Scarf. We investigate the computational complexity of various questions regarding the situation of an agent a in a housing market H: we show that it is [Formula: see text]-hard to find an allocation in the core of H in which (i) a receives a certain house, (ii) a does not receive a certain house, or (iii) a receives a house other than a’s own. We prove that the core of housing markets respects improvement in the following sense: given an allocation in the core of H in which agent a receives a house h, if the value of the house owned by a increases, then the resulting housing market admits an allocation in its core in which a receives either h or a house that a prefers to h; moreover, such an allocation can be found efficiently. We further show an analogous result in the Stable Roommates setting by proving that stable matchings in a one-sided market also respect improvement. Funding: This work was supported by the Hungarian Scientific Research Fund [Grants K124171, K128611]. I. Schlotter is supported by the Hungarian Academy of Sciences under its Momentum Programme (LP2021-2) and its János Bolyai Research Scholarship. The research reported in this paper and carried out by T. Fleiner at the Budapest University of Technology and Economics was supported by the “TKP2020, National Challenges Program” of the National Research Development and Innovation Office [BME NC TKP2020 and OTKA K143858] and by the Higher Education Excellence Program of the Ministry of Human Capacities in the frame of the Artificial Intelligence research area of the Budapest University of Technology and Economics (BME FIKP-MI/SC). P. Biró gratefully acknowledges financial support from the Hungarian Scientific Research Fund, OTKA [Grant K143858] and the Hungarian Academy of Sciences [Momentum Grant LP2021-2].

Options illiquidity in an over-the-counter market

This article reveals that the intensity of search determines whether illiquid currency options trade at premia or at discounts. For options in a standalone search market, illiquidity leads to price premia, as intermediating dealers, who are presumably short in the equilibrium, demand additional compensation. With the presence of listed options at exchanges, illiquidity results in price discounts, as dealers provide concessions for customers’ alternative trading opportunities. The presence of substitutes changes the market outcome. Illiquidity premia and discounts coexist in a sufficiently one-sided market.

Transportation-Enabled Services: Concept, Framework, and Research Opportunities

As a result of rapid advancements in urban infrastructure and technology, transportation is transforming a variety of innovative and emerging services. This paper introduces the concept of transportation-enabled services (TRENS), which is a service model that uses transportation systems to enable and enhance the delivery, accessibility, and effectiveness of nontransportation services. We establish a general framework in which the transportation-enabled services involve four key stakeholders: customers, suppliers, TRENS providers, and transportation carriers. Within this general framework, we present five specific service models: a one-sided market, three variants of two-sided markets, and a three-sided market, each characterized by the interactions among suppliers, TRENS providers, and transportation carriers. Taking different models of transportation-enabled services into consideration, we highlight crucial research opportunities to enhance understanding of the planning, operations, evaluation, and regulation of transportation-enabled services. These research opportunities include demand and supply management, transportation system management and operations, coordination among stakeholders, and the evaluation and regulation of transportation-enabled services. We believe that the emergence, widespread adoption, and popularity of transportation-enabled services will significantly enhance and reshape many services and thus contribute to the overall improvement of future mobility in the broader context of smart cities. History: This paper has been accepted for the Service Science Special Issue on Innovation in Transportation-Enabled Urban Services. Funding: The work of Hai Wang was supported by the Lee Kong Chian Fellowship awarded by Singapore Management University. The work of Hao Sun was supported by the National Natural Science Foundation of China [Grants 72301179].

Liquidity Provision in a One-Sided Market: The Role of Dealer-Hedge Fund Relations

Liquidity Provision in a One-Sided Market: The Role of Dealer-Hedge Fund Relations

The Higher Risk, The Higher Price? A Theoretical and Empirical Analysis of Pricing Strategy in P2P Lending

As an increasing number of P2P lending platforms choose posted-price mechanisms (the platform determines the interest rate), a crucial but unanswered question is: how do interest rates affect market outcomes? Because P2P lending platforms are characterized by two-sidedness and information asymmetry, the effects of interest rate pricing on market outcomes may differ from the traditional one-sided market. We address our research question theoretically and empirically. We first construct a simple general model to investigate the effect of interest rate on the platform profit and investment risk, taking into account the participation decisions of lenders and borrowers and platform pricing strategies (i.e., transaction fees to users on both sides). Our model implies that the investment risk has a non-monotonic relationship with interest rates. Inspired by our theoretical analyses, we then conduct a robust and solid counterfactual econometric analysis and empirically show that an inverted U-shaped non-monotonic interest rate design demonstrates its advantages in reducing credit risks and improving the platform’s profits by 33.89%. This study extends our understanding of the role of price in two-sided platforms with platform mandated price mechanisms and information asymmetry; the findings have important policy implications for interest rate regulation in the P2P lending industry from the perspective of two-sided platforms.

Time-based or fixed-fee? How to penalize cancellation of orders of car-hailing applications

While waiting for an ordered ride service through a car hailing application (CHA), a customer may encounter a taxi. Hence, the customer may cancel the CHA order and take the taxi instead. CHAs often charge penalty fees for such order cancellations. In this paper, we study the effect of different cancellation penalty schemes on the system performance. Comparing different payment schemes is a classic OM topic but the past studies mainly focus on the one-sided market. Our question is new here as it studies the penalty schemes in a two-sided market, in which the demand-side customers’ cancellation behavior imposes costs on the supply-side drivers. Furthermore, a penalty scheme affects customers’ strategic behavior, which is modeled as a two-stage decision problem. We mainly adopt stochastic model to capture the stochastic system’s performance and conduct optimization on customers’ and CHA platforms’ decisions. We first show that the penalty fee shall be equal to the CHA car driver’s cost due to order cancellation so as to achieve the social cost minimization (or social welfare maximization). We then consider a special case with a linear time-dependent cost function for drivers, and study the optimal time-based scheme and the optimal fixed-fee scheme. We find that the fixed-fee scheme is likely to generate more users when the number of CHA cars is limited. In contrast, the time-based scheme encourages early cancellation and prevents late cancellation, performing the best in the social cost minimization.

Toward Efficient Network Resource Sharing: From One-Sided Market to Two-Sided Market

Resource sharing in wireless networks has been a hot topic for years. It mainly deals with two main goals: incentive mechanism design to motivate resource owners to contribute resources on the supply side of the market, and resource allocation to efficiently assign the obtained resources to end users on the demand side. Mos existing resource sharing is based on the one-sided model. However, one application of the two-sided model, sharing economy, is reshaping conventional business models with a substantial growth in both market size and profit. We see a great potential to increase profit and efficiency by adopting the two-sided market model in wireless networks, so as to bridge user demand and resource supply simultaneously from both sides of the network. However, as to wireless networks with typical network features, many problems cannot be tackled based upon existing models. In this work, we provide the basic concept of a two-sided market, together with the challenges and applications of using a two-sided market model to tackle the resource sharing problem in various kinds of networks. Potential methodologies to solve resource sharing problems in two-sided markets are also presented sequentially and compared. In the end, future directions for resource sharing under the two-sided market model are discussed.

Ohio v. American Express: Misunderstanding Two-Sided Platforms, the Credit Card 'Market,' and the Need for Procompetitive Justifications

In Ohio v. American Express Co., the United States Supreme Court had its first knowing encounter with what it incorrectly viewed as a two-sided platform in the context of American Express’ Non Disclosure Provisions (NDP). Under these provisions merchants accepting the American Express card for payment are not permitted to inform consumers that other cards charge merchants less for their use and that this could be reflected in the final price paid. The opinion includes poor reasoning, a lack of attention to precedent, and bad news for those who thought antitrust law was due for a revival. Yet, and perhaps surprisingly, the outcome may be correct. Part II of this Essay very briefly summarizes the antitrust landscape in order to provide an understanding of where the practices of America Express fit. Part III then discusses the two-sided market issue generally and how it was treated in American Express specifically. That Part includes an explanation of why what was involved in American Express was actually a one-sided market that had been segmented in the interests of price discrimination. In fact, American Express and its competitors sell a single product to one group of customers: the right to delay payment to purchasers of goods and services. Part IV also makes the point that the American Express system shares characteristics of tying, resale price maintenance, and exclusive dealing. It further claims that the NDP shares none of the qualities that make those practices frequently lawful. American Express’s activity skirts the edges of several vertical restraints and its underlying character restricted interbrand competition. Part V includes general observations about the case and suggests the outcome may be correct but that the reasoning employed to get there is troublesome in that it continues the trend to minimize the importance of antitrust law.

A Theory of Digital Firm-Designed Markets: Defying Knowledge Constraints with Crowds and Marketplaces

In this paper, we investigate the ways in which new forms of organization enabled by digital technologies, such as crowdsourcing and digital marketplaces, are allowing firms to circumvent and defy traditional knowledge constraints. This is part of the broader question of when and why these forms of organization are more efficient relative to alternatives, given that some firms simultaneously utilize crowdsourcing, marketplaces, and traditional forms of organization. We observe that an important cluster of these new organizational forms are able to circumvent knowledge constraints, because they combine elements of market and hierarchical organization in firm-designed hybrid arrangements. We further categorize these firm-designed markets into one-sided market arrangements (crowds) and two-sided market arrangements (marketplaces). To explain their efficiency relative to hierarchies and relative to each other, we take a knowledge-based perspective and review ways in which firm-designed markets reduce or remove both first-order (known unknown) and second-order (unknown unknown) knowledge constraints compared with hierarchies. Our argument hinges on the notion that firm-designed markets provide semidirected and undirected search and generativity mechanisms that allow firms to go beyond what is possible with centrally directed search.

An agent-based day-to-day adjustment process for modeling ‘Mobility as a Service’ with a two-sided flexible transport market

Due to advances in communications technologies and social networks, flexible mobility systems such as taxi, carpool and demand responsive transit have gained interest among practitioners and researchers as a solution to address such problems as the ``first/last mile problem". While recent research has modeled these systems using agent-based stochastic day-to-day processes, they assume only traveler adjustment under a one-sided market setting. What if such systems are naturally ``two-sided markets" like Uber or AirBnB?In this study, we explore flexible transport services in the framework of two-sided markets, and extend an earlier day-to-day adjustment process to include day-to-day adjustment of the service operator(s) as the seller and the built environment as the platform of a two-sided market. We use the Ramsey pricing criterion for social optimum to show that a perfectly matched state from a day-to-day process is equivalent to a social optimum. A case study using real data from Oakville, Ontario, as a first/last mile problem example demonstrates the sensitivity of the day-to-day model to operating policies. Computational experiments confirm the existence of locally stable states. More importantly, the experiments show the existence of thresholds from which network externalities cause two-sided and one-sided market equilibria to diverge.

The other side of an airport’s two-sided market: issues in planning and pricing airport surface access

The first part of the paper considers the two-sided nature of airport platforms, and argues that on the land-side, analysis and policy has generally over-stated the items that should be included. In this context, the paper’s focus is on airport access and how it should be embraced, along with airside considerations, in a two-sided framework when establishing prices and investment. In the second part, the more theoretical argument is juxta positioned with prior empirical analysis of landside access which has largely been treated in a rather ad hoc way, usually implicitly assuming it involves a one-sided market. The subsequent arguments of what needs to be done, are suggestive rather than specific given the diverse institutional and physical nature of airports and their surroundings.

The economy as instituted process

[The economy as instituted process] “The economy as instituted process” from 1957 is probably the second most well known text of Karl Polanyi (1886–1964) after his main work The Great Transformation from 1944. Here he explains the difference between the two meanings of the concept of economy, of economy as humans’ actual, substantial, exchange with nature and each other, and economy as a formalized way of thinking about rational optimization. Polanyi argues that the social sciences must liberate themselves from the one-sided market perspective that follows from the formal meaning, and instead starts out from the former, substantive, meaning when he develops his own concepts of how the economy really has worked in different societies throughout history. The economy appears to Polanyi as an instituted, or institutionalized, process, more or less embedded in a social fabric of other both economic and non-economic institutions. The text was written as a summarizing theoretical chapter for the book Trade and Market in the Early Empires , which Polanyi compiled together with Conrad M. Arensberg and Harry W. Pearson. The main article is introduced by the three editors’ own prologue to it, and by a new introduction by sociologists Gunnar Olofsson and Anders Hylmo. Publication history: Translation of the chapters “The economy as instituted process” and “The place of economies in societies” from Karl Polanyi, Conrad M. Arensberg & Harry W. Pearson (eds.), Trade and Market in the Early Empires. Economies in History and Theory , Free Press 1957, with a new Swedish introduction. (Published 8 June 2017) Citations: Olofsson, Gunnar & Anders Hylmo (2017) “Inledning till Karl Polanyis ‘Ekonomin som inrattad process’” (pp. 9–12), Polanyi, Karl, Conrad M. Arensberg & Harry W. Pearson (2017 [1957]) “Ekonomins plats i samhallet” (pp. 13–16), Polanyi, Karl (2017 [1957]) “Ekonomin som inrattad process”, in Arkiv. Tidskrift for samhallsanalys , issue 8, pp. 17–46. DOI: https://doi.org/10.13068/2000-6217.8.1

Price discrimination in two-sided markets

The use of a price discrimination strategy is an important tool in competition. It can hurt firms and benefit consumers in a one-sided market. However, in two-sided markets, its primary goal is to attract more agents or increase profits. Here, the performance of a second-degree price discrimination strategy in the context of duopoly two-sided platforms is analysed. Two exogenous variables, which include the discount rate and the price discrimination threshold, are used in order to examine whether the price discrimination strategy could help two-sided platforms achieve their objective, which is to maximise their market value. Three cases are considered, and we demonstrate that the price discrimination strategy cannot attract more agents and at the same time increase the profits; a lower price discrimination threshold cannot ensure larger markets shares; a higher discount rate is detrimental to the profit of a platform. However, this is good for its market shares. Moreover, discriminative pricing increases the competition.

Price discrimination in two-sided markets

The use of a price discrimination strategy is an important tool in competition. It can hurt firms and benefit consumers in a one-sided market. However, in two-sided markets, its primary goal is to attract more agents or increase profits. Here, the performance of a second-degree price discrimination strategy in the context of duopoly two-sided platforms is analysed. Two exogenous variables, which include the discount rate and the price discrimination threshold, are used in order to examine whether the price discrimination strategy could help two-sided platforms achieve their objective, which is to maximise their market value. Three cases are considered, and we demonstrate that the price discrimination strategy cannot attract more agents and at the same time increase the profits; a lower price discrimination threshold cannot ensure larger markets shares; a higher discount rate is detrimental to the profit of a platform. However, this is good for its market shares. Moreover, discriminative pricing increases the competition.

Does Becoming a Platform Pay Off? Reconfiguring the Business Model for Two-Sided Markets

Digital technologies have opened new possibilities for firms to experiment with business models and deliberately change between them when new opportunities arise. We study a widely used platform-based business model in the software industry where consumers can use applications for free while being exposed to advertising that is charged for. Importantly, in this configuration the market structure is two-sided, where both positive direct network effects (i.e. social factors) and negative indirect network effects (i.e. nuisance due to ads) affect usage on the consumers’ side of the platform that then affects demand for ads. Changing from one-sided to two-sided market structure imposes a major systemic change in the business model that may significantly affect the performance of the focal firm. Based on the results from an agent-based simulation model, we find that especially when the initial business model with one-sided market structure is not optimized for performance, the change to the advertising busines...

Surplus efficiency of ex ante investments in matching markets with nontransferabilities

Does a competitive equilibrium in a matching market provide adequate incentives for investments made before the market when utility is not perfectly transferable? In a one-sided market with a continuum of agents and finite types there is a constrained surplus efficient equilibrium, when a social planner can only affect investments but not payoffs nor matches, if an equal treatment property holds in equilibrium. Sufficient (but not full) utility transferability in a well defined sense implies this property. Ex post efficiency of payoffs (i.e., individual payoffs maximize the surplus in each match) alone is not sufficient to ensure that equilibrium investments maximize aggregate surplus.

Skill-Biased Labor Market Reforms and International Competitiveness

AbstractThis paper proposes a multi-industry trade model with integrated capital and goods markets. Labor market imperfections in line with Mortensen and Pissarides (Job Creation and Job Destruction in the Theory of Unemployment, 1994) give rise to unemployment and a channel for the government to influence markets through institutional changes. Labor market interventions feedback into the product market through changes in a country’s competitiveness. Moreover, the distinction between high- and low-skill workers facilitates the analysis of skillbiased institutional changes that have stronger impact on certain skill groups. The comparative static exercise in this paper shows that high-skilled benefit from low-skill biased labor market reforms through higher wages. Lower labor costs reduce unemployment of the low-skilled and increases the reforming country’s competitiveness. One-sided labor market interventions have feedback effects through adjustments at the extensive margin, which affect all workers at home and abroad irrespective of their level of skill. Governments in the non-reforming countries may react to this loss in competitiveness by initiating cooperative labor market reforms instead.

On Game Behavior of the Inventory Pledge Banks and the Logistical Enterprises

This paper introduces the mechanism design theory to establish Stacklberg Game Model in which with perfect information, logistical enterprises are leading decision makers, analyzing the game behavior of inventory financing with the method of backward induction. The results indicate that with perfect information, two-sided market of banks and logistical enterprises has more advantages than one-sided market of banks, and logistical enterprises are willing to improve their risk ratio to gain interest reduction from banks, which can lead to demand for financing.

ANTITRUST AND COMPETITION IN TWO-SIDED MARKETS

This article extends antitrust analysis to two-sided markets in which a virtual monopolist competes with local bricks-and-mortar dealers. The discussion examines the market power of an Internet market maker as well as an Internet matchmaker. The analysis shows that equilibrium in a two-sided market can be characterized as a one-sided market in which transaction demand depends on the bid-ask spread of the central market maker. This allows for a straightforward extension of critical demand elasticity and critical loss analysis from one-sided markets to two-sided markets, with antitrust tests based on the hypothetical monopolist's bid-ask spread. Antitrust analysis of a one-sided market also carries over to a two-sided market with a matchmaker where antitrust tests are based on the sum of participation fees.