A SSNIP Test for Two-sided Markets: The Case of Media

Research output: Working paperOther research output

Abstract

I discuss the design and implementation of a SSNIP test in order to identify the relevant market in a media market. I argue that in such a two-sided market the traditional SSNIP test cannot be applied as it is usually conceived but rather should be modified in order to take into account indirect network externalities. I discuss the issues of which price the hypothetical monopolist should be thought of as raising, of whether we should look at profits changes on only one side or on both sides of the market and of which feedback among the two sides of the market we should take into account. I then derive the relevant formulas for Critical Loss Analysis. These look much uglier than in a single-sided market but in fact they are easy to calculate as they are still expressed in terms of elasticities and of current observed markups, prices and quantities. Data requirements are however higher as one needs to estimate the matrixes of the own and cross price elasticities of demand on the two-sides of the market and the matrixes of the network effects.
Original languageEnglish
PublisherNET Institute
Number of pages46
Volume08-34
Publication statusPublished - Oct 2008

Publication series

NameNET Institute Working Paper
Volume08-34

Keywords

  • Two-sided markets
  • SSNIP test
  • hypothetical monopolist test
  • critical loss analysis
  • critical elasticity analysis
  • market definition
  • media

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