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AbstractWhenever agents to a transaction (for example, consumers and suppliers) interact through intermediaries or a 'platform' that is controlled by a third party, the agents are using a two‐sided platform. Two‐sided platforms are common. However, if a two‐sided platform involves network effects, so that participants on one side of the platform care about the number of participants on the other side of the platform, it is a two‐sided market. These markets raise a variety of important issues for economists and policy‐makers. In this article, I briefly explain the nature of two‐sided markets and, using simple examples, show how they can behave very differently to standard one‐sided markets.

Two-sided platform firms serve distinct customer groups that are connected through interdependent demand, and include major businesses such as the media industry, banking, and the software industry. A well known textbook result in one-sided markets is that a government may increase a monopolist's output and reduce the deadweight loss by subsidizing output. The present paper shows that this result need not hold in a two-sided market. On the contrary, a higher ad-valorem tax rate - rather than a subsidy - could increase output and enhance welfare.

In this paper we present the results of the analysis of firm behavior in two-sided market with product differentiation. Based on the developed model, we study the conditions when it is profitably for a firm to launch two versions of a product: full and test platform models. In our analysis we draw on the methods of microeconomics, industrial economics, game theory and contract theory. The main conclusions confirm the benefit from versioning strategy in a firm in case of strong indirect network effects in the market between the two groups of agents. Product versioning allows the firm to separate agents more effectively: the first group with high product and connection value and the second group that generates high network effects. We noted that product differentiation is preferable for agents from the second group.

AbstractThis paper considers a mixed duopoly two‐sided market of platforms in which a private firm competes with a public firm in a linear city model with fixed demand of full coverage. We examine whether prices of platforms are lower in the mixed duopoly market than in the standard pure duopoly market in which two private firms compete. We show that introducing a public competitor may or may not induce lower prices of the private platform than introducing a private firm, depending on the quality of the public platform service. In particular, if the quality of the public platform is superior, the prices of the platforms are lower than when it competes with the private rival, whereas they are higher if the quality is lower. We also show that the private firm invests more than the public firm. This has the policy implication that maintaining lower platform prices by introducing a competing public platform will not be sustainable in the long run.

The object of this paper is to discuss on-line intermediation from the perspective of two-sided markets. It builds a simple model of the intermediation activity when trading partners are involved in a commercial relationship and uses it to illustrate some of the results that emerge in the two-sided market literature, as well as to discuss some new aspects. The first part concentrates on a monopoly intermediation service and discusses both efficient pricing and monopoly pricing. The second part discusses the nature of competition between intermediaries, addressing issues as competitive crosssubsidies, multi-homing or tying.