Antitrust and competition in two-sided markets

Alexei Alexandrov, George Deltas, Daniel F. Spulber

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish (US)
Article numbernhr012
Pages (from-to)775-812
Number of pages38
JournalJournal of Competition Law and Economics
Volume7
Issue number4
DOIs
StatePublished - Dec 1 2011

ASJC Scopus subject areas

  • Economics and Econometrics
  • Law

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