Generally, antitrust analysis of multisided markets requires different understandings of market power and competitive effects. Unlike in traditional markets, in some cases multisided market power may actually limit a firm’s ability to engage in anticompetitive conduct; conversely, in other cases reducing a firm’s market power may reduce social welfare. In terms of competitive effects, we need to look at how firms compete in multisided markets and how this process of competition affects social welfare. A central, and unique, element of competition in multisided markets is that firms compete by trying to get each side of the market to identify them with high-value participants of the other sides of the market. In addition, two analytical factors critical to understanding the effects of competition on social welfare are the need to understand the direction (positive or negative) of effects that changed participation on one side of the market has on the other sides, and the need to look at the effect that such changes have on the average (not the marginal) consumer.
Each of these considerations stands out as different from both traditional understandings of competition and traditional approaches to antitrust analysis. By identifying these differences and discussing how to think about them, this paper helps to improve how we think about this important class of markets – and hopefully will help to avoid harmful antitrust and regulatory action in them.
November 21, 2011 | Permalink
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