ANTITRUST AND COMPETITION IN TWO-SIDED MARKETS

Posted by D. Daniel Sokol

Alexei Alexandrov (Rochster), George Deltas (Illinois) and Daniel F. Spulber (Northwestern) have written on ANTITRUST AND COMPETITION IN TWO-SIDED MARKETS.

ABSTRACT: This article extends antitrust analysis to two-sided markets in which a virtual monopolist competes with local bricks-and-mortar dealers. The discussion examines the market power of an Internet market maker as well as an Internet matchmaker. The analysis shows that equilibrium in a two-sided market can be characterized as a one-sided market in which transaction demand depends on the bid-ask spread of the central market maker. This allows for a straightforward extension of critical demand elasticity and critical loss analysis from one-sided markets to two-sided markets, with antitrust tests based on the hypothetical monopolist's bid-ask spread. Antitrust analysis of a one-sided market also carries over to a two-sided market with a matchmaker where antitrust tests are based on the sum of participation fees.