Upward pricing pressure in two-sided markets: Incorporating rebalancing effects |
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| Affiliation: | 1. Economix, UPL, University Paris Nanterre, CNRS, University Paris Nanterre and EconomiX-CNRS, Nanterre F92000, France;2. Department of Economics, University of Bergen, Bergen, Norway;3. Department of Economics, Norwegian School of Economics, Bergen, Norway;1. University of Milano, Department of Economics, Management, and Quantitative Methods Via Conservatorio, 7, Milano 20122, Italy;2. Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille AMSE, France;3. CEF.UP, University of Porto, Portugal;1. Lancaster University Management School, United Kingdom;2. Humboldt-Universität zu Berlin, Germany;1. University of Cape Town, School of Economics, Rondebosch, Cape Town, 7701, South Africa;2. Telecom ParisTech, 46 rue Barrault, 75013 Paris, France & University of Cape Town, School of Economics, Rondebosch, Cape Town, 7701, South Africa;1. Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine University Düsseldorf, Germany;2. Westfälische Wilhelms-University Münster, Germany;3. CERNA Mines ParisTech, France;1. PUC-Chile;2. Tel-Aviv University;3. KU Leuven |
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| Abstract: | In two-sided markets it is important to consider rebalancing effects following a merger, i.e. the impact of a change in margin on one side of the market, either due to a price change or to efficiency gains, on the pricing incentives on the other side. We propose modified versions for the indices of pricing pressure (UPP and GUPPI) that take this into account. We show that in two-sided markets where the cross-group externalities are positive the upward pricing pressure will typically be overstated if the rebalancing effect is ignored. Our approach explains why competition agencies should look at both sides of the market when assessing platform mergers. |
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