Competition and regulatory policy for multi-sided platforms with applications to the Web economy

This article is about a type of business that connects distinct groups of customers on a “multi-sided platform.” Such businesses have been around for millennia. But their economic importance has increased with theIInternet revolution. Many significant web-based businesses such as eBay, Facebook, and Google are multi-sided. Multi-sided platform businesses must account for the fact that each type of customers they attract values more of the other type of customers. Buyers value many sellers and sellers many buyers, for example, on Internet auction sites. That interdependence has significant implications for the economic behavior of these businesses (they often break even or lose money on customers on one side) and for how competition authorities and regulators should analyze them (market definition must account for the linkages between the multiple customer groups). Multi-sided platforms tend to engage in complex business practices. The challenge for policymakers is distinguishing anticompetitive from complicated but benign behavior. This paper is based on the Beesley Lecture, sponsored by the London Business School and the Institute for Economic Affairs, which I was invited to deliver on 26 October 2007 in London. I would like to thank Rachel Brandenburger, Howard Chang, Leonard Waverman, and members of the audience for many helpful comments and suggestions and Aditya Bhave for excellent research assistance. Portions of this paper have benefited from collaborative work with Thomas Eisenmann of Harvard Business School, Andrei Hagiu of Harvard Business School, and Richard Schmalensee of the Massachusetts Institute of Technology.

Sur les marchés double-face, voir aussi dans ce numéro:

- Benoît Durand, Two-sided markets : Yin and Yang - A review of recent UK mergers, Concurrences, N° 2-2008

- Francesco Rosati, Is merger assessment different in two-sided markets? Lessons from the Travelport/Worldspan, Concurrences, N° 2-2008.

1. A multi-sided platform (MSP) unleashes the hidden value from getting different customer groups together on the same platform and getting them to interact. These “economic catalysts” have been around for millennia. Ancient Athens had an insurance exchange which helped shippers who needed insurance and financing get together with investors who were willing to assume risk and lend . The village matchmaker goes back even farther. Yet MSPs were only recently discovered as a species of business by Rochet and Tirole whose work started circulating around 2000 . Economists now understand that exchanges, payment systems, software platforms, video game consoles, advertising-supported media, shopping malls and many other industries are populated by MSPs. The linkage between the multiple sides

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  • Competition Policy International


David Evans, Competition and regulatory policy for multi-sided platforms with applications to the Web economy, May 2008, Concurrences N° 2-2008, Art. N° 16302, pp. 57-62

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