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Upward Price Pressure in Two-Sided Markets: Incorporating Feedback Effects

Author

Listed:
  • Andreea Cosnita-Langlais
  • Bjørn Olav Johansen
  • Lars Sorgard
Abstract
In two-sided markets it is important to consider feedback effects following a merger, i.e. how a price change on one side of the market affects the price change on the other side of the market. Affeldt et al. (2013) introduced the Upward Pricing Pressure (UPP) for two-sided markets, and we extend their approach to take into account such feedback effects. We then discuss the implications of our results for the assessment of two-sided mergers.

Suggested Citation

  • Andreea Cosnita-Langlais & Bjørn Olav Johansen & Lars Sorgard, 2018. "Upward Price Pressure in Two-Sided Markets: Incorporating Feedback Effects," EconomiX Working Papers 2018-3, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2018-3
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    References listed on IDEAS

    as
    1. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
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    3. Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(2), pages 407-426, October.
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    5. Lapo Filistrucchi & Damien Geradin & Eric van Damme & Pauline Affeldt, 2014. "Market Definition In Two-Sided Markets: Theory And Practice," Journal of Competition Law and Economics, Oxford University Press, vol. 10(2), pages 293-339.
    6. Ying Fan, 2013. "Ownership Consolidation and Product Characteristics: A Study of the US Daily Newspaper Market," American Economic Review, American Economic Association, vol. 103(5), pages 1598-1628, August.
    7. Jéssica Dutra & Tarun Sabarwal, 2020. "Antitrust analysis with upward pricing pressure and cost efficiencies," PLOS ONE, Public Library of Science, vol. 15(1), pages 1-31, January.
    8. Lars Mathiesen & Øivind Anti Nilsen & Lars Sørgard, 2012. "A Note On Upward Pricing Pressure: The Possibility Of False Positives," Journal of Competition Law and Economics, Oxford University Press, vol. 8(4), pages 881-887.
    9. Miller, Nathan H. & Remer, Marc & Ryan, Conor & Sheu, Gloria, 2017. "Upward pricing pressure as a predictor of merger price effects," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 216-247.
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    12. Tommaso Valletti & Hans Zenger, 2021. "Mergers with Differentiated Products: Where Do We Stand?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 179-212, February.
    13. Patrick Cayseele & Stijn Vanormelingen, 2019. "Merger Analysis in Two-Sided Markets: The Belgian Newspaper Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(3), pages 509-541, May.
    14. Pauline Affeldt & Lapo Filistrucchi & Tobias J. Klein, 2013. "Upward Pricing Pressure in Two‐sided Markets," Economic Journal, Royal Economic Society, vol. 123(11), pages 505-523, November.
    15. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
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    20. Lydia Cheung, 2016. "An Empirical Comparison Between The Upward Pricing Pressure Test Andmerger Simulation In Differentiated Product Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 12(4), pages 701-734.
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    Cited by:

    1. Joao Correia‐da‐Silva & Bruno Jullien & Yassine Lefouili & Joana Pinho, 2019. "Horizontal mergers between multisided platforms: Insights from Cournot competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 109-124, January.
    2. Michael Trost, 2021. "Is the Whole Greater than the Sum of Its Parts? Pricing Pressure Indices for Mergers of Vertically Integrated Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(2), pages 235-262, March.
    3. Trost, Michael, 2018. "The whole is greater than the sum of its parts: Pricing pressure indices for mergers of vertically integrated firms," Hohenheim Discussion Papers in Business, Economics and Social Sciences 06-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    4. Eduardo Pontual Ribeiro & Svetlana Golovanova, 2020. "A Unified Presentation Of Competition Analysis In Two‐Sided Markets," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 548-571, July.
    5. Baranes, Edmond & Cortade, Thomas & Cosnita-Langlais, Andreea, 2019. "Horizontal mergers on platform markets: cost savings v. cross-group network effects?," MPRA Paper 97459, University Library of Munich, Germany.

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    More about this item

    Keywords

    merger assessment; two-sided markets; Upward Pricing Pressure;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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