Working paper

Collusion in Two-Sided Markets

Yassine Lefouili, and Joana Pinho

Abstract

This paper explores the incentives for, and the effects of, collusion in prices between two-sided platforms. We characterize the most profitable sustainable agreement when platforms collude on both sides of the market and when they collude on a single side of the market. Under two-sided collusion, prices on both sides are higher than competitive prices, implying that agents on both sides become worse off as compared to the competitive outcome. An increase in cross-group externalities makes two-sided collusion harder to sustain, and reduces the harm from collusion suffered by the agents on a given side as long as the collusive price on that side is lower than the monopoly price. When platforms collude on a single side of the market, the price on the collusive side is lower (higher) than the competitive price if the magnitude of the cross-group externalities exerted on that side is sufficiently large (small). As a result, one-sided collusion may benefit the agents on the collusive side and harm the agents on the competitive side.

Keywords

Collusion; Two-sided markets; Cross-group externalities;

JEL codes

  • D43: Oligopoly and Other Forms of Market Imperfection
  • L41: Monopolization • Horizontal Anticompetitive Practices

Reference

Yassine Lefouili, and Joana Pinho, Collusion in Two-Sided Markets, TSE Working Paper, n. 18-894, February 2018.

See also

Published in

TSE Working Paper, n. 18-894, February 2018