One-sided Market Research Articles

Estimating Platform Market Power in Two-Sided Markets with an Application to Magazine Advertising

In this paper I develop a structural model of platform demand in two-sided markets and use it to estimate platform market power and predict price changes in post-merger markets. My model and estimation procedure are applicable to settings where (1) agents on each side care about the presence of agents on the other side and (2) platforms charge access fees on both sides. Using data on TV magazines in Germany I show that the magazines typically set copy prices below marginal costs and make profits from selling advertising space. I also show that platform mergers are much less harmful to consumers (readers and advertisers) than what the one-sided market model predicts.

Dislocations in FX Swap and Money Markets in Hong Kong and Policy Actions during the Financial Crisis of 2008

When US dollar interbank markets malfunctioned during the global financial crisis of 2008, many non-US financial institutions relied heavily on FX swap markets for US dollar funds. This one-sided market induced a risk premium of the FX swap-implied US dollar rate across a range of funding currencies, i.e. a deviation from the covered interest parity (CIP) condition. The turbulence in the global interbank markets therefore spilled over to the FX swap markets, including that in Hong Kong. This paper analyses the effectiveness of the policy actions taken by the Hong Kong Monetary Authority and the government in responding to the dislocations and stress in the local interbank and FX swap markets. Our results show that the policy actions effectively ameliorated the FX swap market dislocations after the failure of Lehman Brothers, i.e. reducing the CIP deviations.

A pairwise-monotonic core selection for permutation games

In this article, a single-valued solution for permutation games is proposed. If we consider that each agent on the permutation game acts both as a buyer and as a seller, a related assignment game with the same reward matrix is defined. In this two-sided related market, the midpoint between the buyers-optimal core allocation and the sellers-optimal core allocation is considered. Then, each agent in the permutation game merges his payoff as a buyer and his payoff as a seller. This solution belongs to the core of the one-sided market and it is pairwise-monotonic.

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.

The Tort of Negligent Enablement of Cybercrime

Michael L. Rustad and Thomas H. Koenig propose a new tort of negligent enablement which will hold software vendors accountable for defective products and services that pave the way for third party cybercriminals who exploit known vulnerabilities. At present, the software industry has externalized the costs of making code safe for its intended environment of use onto its end users through one-sided mass market agreements. The proposed negligent enablement tort fills the void left by the failure of contract law to give meaningful remedies for the unacceptably high levels of risk of computer intrusions due to defective software. The public policy rationale for imposing secondary tort liability on software publishers who aid and abet cybercriminals is to reduce the rate of cybercrime. The proposed negligent enablement tort draws upon wellestablished principles of the Uniform Commercial Code (UCC) Article 2 warranties, premises liability, and negligence-based product liability to construct a modified duty of care to produce safe software suitable for its environment of use. This Article examines the elements of duty, breach, causation, and damages for the proposed negligent enablement tort as well as defenses, procedure, and possible policy-based objections. © 2005 Michael L. Rustad & Thomas H. Koenig f Michael L. Rustad Ph.D., J.D., LL.M. is the Thomas F. Lambert Jr. Professor of Law and Co-Director of the Intellectual Property Law Concentration at Suffolk University Law School in Boston, Massachusetts. t Professor Thomas H. Koenig chairs Northeastern University's Sociology and Anthropology Department and is on the Executive Committee of its Law, Policy & Society Doctoral Program. We appreciate the editorial work and substantive suggestions of Chryss J. Knowles on this piece. Our research assistants, Shannon Downey, Kara Frato, John Hebb, and Conway Kennedy, worked diligently and creatively. Diane D'Angelo, a research librarian at Suffolk University Law School, provided us with extraordinary substantive assistance. Thank you also to the members of the Berkeley Technology Law Journal who contributed to the editing of this piece. BERKELEY TECHNOLOGY LAW JOURNAL