Areeda-turner in two-sided markets

S. Behringer, L. Filistrucchi

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We extend the Areeda–Turner rule to two-sided markets. We show that a two-sided monopolist may find it short-run profit-maximizing to charge a price below marginal cost on one side of the market. Hence showing that the price is below marginal cost on one side of a two-sided market cannot be considered a sign of predation. We then argue for a two-sided Areeda–Turner rule that takes into account price-cost margins on both sides of the market. Two examples highlight that applying a one-sided Areeda–Turner rule may lead one to assess legitimate prices as predatory or to consider predatory prices as legitimate.
Original languageEnglish
Pages (from-to)287-306
JournalReview of Industrial Organization
Volume46
Issue number3
DOIs
Publication statusPublished - 2015

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Keywords

  • daily newspapers
  • market definition
  • network effects
  • predation
  • two-sided markets

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