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PLATFORM COMPETITION IN TWO-SIDED MARKETS







Many if not most markets with network externalities are two-sided. To succeed, platforms in
industries such as software, portals and media, payment systems and the Internet, must “get
both sides of the market on board.” Accordingly, platforms devote much attention to their
business model, that is, to how they court each side while making money overall. This paper
builds a model of platform competition with two-sided markets. It unveils the determinants
of price allocation and end-user surplus for different governance structures (pro􏰜 t-maximiz-
ing platforms and not-for-pro􏰜 t joint undertakings), and compares the outcomes with those
under an integrated monopolist and a Ramsey planner. (JEL: L5, L82, L86, L96) 



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