Two-Sided Markets with Pecuniary and Participation Externalities

By Markus Reisinger, Ludwig Ressner, Richard Schmidtke. Social Science Research Network, 2009

126 citations recorded by the source corpus.

The existing literature on "two-sided markets" addresses participation externalities, but so far it has neglected pecuniary externalities between competing platforms. In this paper we build a model that incorporates both externalities. In our setup differentiated platforms compete in advertising and offer consumers a service free of charge (such as a TV program) that is financed through advertising. We show that advertising can exhibit the properties of a strategic substitute or complement. Surprisingly, there exist cases in which platforms benefit from market entry. Moreover, we show that from a welfare point of view perfect competition is not always desirable.

Subfields: Marketing, Media Technology, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/e1b744985fa544edc5e814bc2020f89d79479056

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Marketing

In Media Technology

In Strategy and Management

Citations in the corpus

Semi-collusion in media markets (2011, background): “Maximizing firm i’s profit Πi with respect to pi yields 9A similar functional form for the advertising demand function is assumed in Reisinger et al. (2009).”
Regulating Advertising in the Presence of Public Service Broadcasting (2012, methodology): “Here we check the robustness of our results and confirm their validity in the setting of Reisinger et al. (2009). By offering two alternative microfoundations they derive an advertisers’ demand function of”