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Two-sided markets, competitive bottlenecks and exclusive contracts. (English) Zbl 1123.91017

Summary: We provide a framework for analyzing two-sided markets that allows for different degrees of product differentiation on each side of the market. When platforms are viewed as homogeneous by sellers but heterogeneous by buyers, we show that “competitive bottlenecks” arise endogenously. In equilibrium, platforms do not compete directly for sellers, instead choosing to compete indirectly by subsidizing buyers to join. Sellers are left with none of the gains from trade. Despite this, it is sellers who choose to purchase from multiple platforms (multihome). Finally, the role of exclusive contracts to prevent multihoming is explored.

MSC:

91B26 Auctions, bargaining, bidding and selling, and other market models
91B40 Labor market, contracts (MSC2010)
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References:

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