Segmentation versus agglomeration : competition between platforms with competitive sellers


Karle, Heiko ; Peitz, Martin ; Reisinger, Markus


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URL: https://ub-madoc.bib.uni-mannheim.de/43128
URN: urn:nbn:de:bsz:180-madoc-431286
Document Type: Working paper
Year of publication: 2017
The title of a journal, publication series: Working Paper Series
Volume: 17-03
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > VWL, Industrieökonomik, Wettbewerbspolitik u. Regulierung (Peitz 2007-)
MADOC publication series: Department of Economics > Working Paper Series
Subject: 330 Economics
Classification: JEL: L13 , D43,
Keywords (English): intermediation , two-sided markets , market structure , price competition , endogenous segmentation
Abstract: For many products, platforms enable sellers to transact with buyers. We show that the competitive conditions among sellers shape the market structure in platform industries. If product market competition is tough, sellers avoid competitors by joining different platforms. This allows platforms to sustain high fees and explains why, for example, in some online markets, several homogeneous platforms segment the market. Instead, if product market competition is soft, agglomeration on a single platform emerges, and platforms fight for the dominant position. These insights give rise to novel predictions. For instance, market concentration and fees are negatively correlated in platform industries, which inverts the standard logic of competition.

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Karle, Heiko ; Peitz, Martin ; Reisinger, Markus (2017) Segmentation versus agglomeration : competition between platforms with competitive sellers. Open Access Working Paper Series Mannheim 17-03 [Working paper]
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