Estimating Platform Market Power in Two-Sided Markets with an Application to Magazine Advertising

Minjae Song (University of Rochester) is Estimating Platform Market Power in Two-Sided Markets with an Application to Magazine Advertising.

ABSTRACT: In this paper I estimate platform markups in two-sided markets using structural models of platform demand. My models and estimation procedure are applicable to general two-sided market settings where agents on each side care about the presence of agents on the other side and platforms set two membership prices to maximize the sum of profits. Using data on TV magazines in Germany I show that the magazines typically set copy prices below marginal costs and earn profits from selling advertising pages. I also show that mergers are much less anticompetitive than in one-sided markets and could even be welfare enhancing.