Inter-firm price coordination in a two-sided market |
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| Affiliation: | 1. Norwegian School of Economics, Bergen, Norway;2. University of Oslo, Norway;1. Berglas School of Economics, Tel Aviv University, Israeln;2. Coller School of Management, Tel Aviv University, Israeln;1. Department of Economics, Yokohama National University, 79-4 Tokiwadai, Hodogaya-ku, Yokohama 240-8501, Japan;2. Graduate School of Social Sciences, Tokyo Metropolitan University, Japan;1. University of North Carolina, Department of Economics, Chapel Hill, NC 27599-3305, United States;2. Toulouse School of Economics, 21 allée de Brienne, 31015 Toulouse, Cedex 6, France;3. European Commission, DG Competition, Place Madou 1, 1210 Saint-Josse-ten-Noode, Belgium;1. Rotman School of Management, University of Toronto, Toronto, ON, Canada;2. NBER, United States;1. University of Missouri, United States;2. Georgetown University, United States;3. University of Florida, United States |
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| Abstract: | In many two-sided markets we observe that there is a common distributor on one side of the market. One example is the TV industry, where TV channels choose advertising prices to maximize own profit and typically delegate determination of viewer prices to independent distributors. We show that in such a market structure the stronger the competition between the TV channels, the greater will joint profits in the TV industry be. We also show that joint profits may be higher if the wholesale contract between each TV channel and the distributor consists of a simple fixed fee rather than a two-part tariff. |
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