[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/frz/wpaper/wp2014_10.rdf.html
   My bibliography  Save this paper

Areeda-Turner in Two-Sided Markets

Author

Listed:
  • Stefan Behringer
  • Lapo Filistrucchi
Abstract
Areeda and Turner (1975) were the first to argue that a price below marginal costs should be considered a sign of predation. Recognizing that marginal cost data were typically unavailable, the authors concluded that a price below average variable cost should be presumed unlawful. This so-called Areeda-Turner Rule has become the standard to assess claims of predation. We first show that in two-sided markets price cost margins on the two-sides of the market are interrelated and that a monopolist, even in the absence of actual or potential competition, may find it optimal to charge a price below marginal cost on one side of the market. As a result, showing that the price is below average variable cost on one side of the market cannot be considered a sign of predation in such markets. This is in contrast to a recent decision of the Commercial Court of Paris that sanctioned Google for giving away for free its online mapping services. We thus extend the Areeda-Turner rule to two-sided markets. We argue that one should apply the rule by taking into account revenues and costs from both sides of the market. As applications, we analyse three alleged cases of predatory behaviour in the market for daily newspapers. Our examples highlight that applying a one-sided Areeda-Turner rule may lead to assess a perfectly legitimate profit maximizing pricing policy as a predatory attempt.

Suggested Citation

  • Stefan Behringer & Lapo Filistrucchi, 2014. "Areeda-Turner in Two-Sided Markets," Working Papers - Economics wp2014_10.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2014_10.rdf
    as

    Download full text from publisher

    File URL: http://www.disei.unifi.it/upload/sub/pubblicazioni/repec/pdf/wp10_2014.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    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.
    2. Lapo Filistrucchi & Tobias J. Klein & Thomas O. Michielsen, 2012. "Assessing Unilateral Merger Effects In A Two-Sided Market: An Application To The Dutch Daily Newspaper Market," Journal of Competition Law and Economics, Oxford University Press, vol. 8(2), pages 297-329.
    3. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, September.
    4. 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.
    5. 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.
    6. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    7. Amelia Fletcher, 2007. "Predatory Pricing in Two-Sided Markets: A Brief Comment," CPI Journal, Competition Policy International, vol. 3.
    8. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    9. Geoffrey G. Parker & Marshall W. Van Alstyne, 2005. "Two-Sided Network Effects: A Theory of Information Product Design," Management Science, INFORMS, vol. 51(10), pages 1494-1504, October.
    10. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
    11. Lapo Filistrucchi & Damien Geradin & Eric van Damme, 2012. "Identifying Two-Sided Markets," Working Papers - Economics wp2012_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    12. 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.
    13. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    14. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    15. Stefan Behringer & Lapo Filistrucchi, 2009. "Price Wars in Two-Sided Markets: The case of the UK Quality Newspapers," Working Papers 09-26, NET Institute, revised Dec 2009.
    16. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    17. Motta, Massimo & Vasconcelos, Helder, 2012. "Exclusionary Pricing in a Two-Sided Market," CEPR Discussion Papers 9164, C.E.P.R. Discussion Papers.
    18. Elena Argentesi & Lapo Filistrucchi, 2007. "Estimating market power in a two-sided market: The case of newspapers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
    19. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    20. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
    21. Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 292-301, March.
    22. David S. Evans & Michael D. Noel, 2008. "The Analysis Of Mergers That Involve Multisided Platform Businesses," Journal of Competition Law and Economics, Oxford University Press, vol. 4(3), pages 663-695.
    23. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
    24. Lapo Filistrucchi & Tobias J. Klein, 2013. "Price Competition in Two-Sided Markets with Heterogeneous Consumers and Network Effects," Working Papers 13-20, NET Institute.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    2. Amelio, Andrea & Giardino-Karlinger, Liliane & Valletti, Tommaso, 2020. "Exclusionary pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    3. Elias Carroni, 2018. "Poaching in media: Harm to subscribers?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(2), pages 221-236, June.
    4. Valentiny, Pál, 2019. "Közgazdaságtan a jogalkalmazásban [Forensic economics]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 134-162.
    5. 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.
    6. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    7. Michael L. Katz, 2019. "Platform economics and antitrust enforcement: A little knowledge is a dangerous thing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 138-152, January.
    8. Qihong Liu & Daniel Nedelescu & Ji Gu, 2021. "The impact of strategic agents in two-sided markets," Journal of Economics, Springer, vol. 134(3), pages 195-218, December.
    9. Eric Darmon & Thomas Le Texier & Zhiwen Li & Thierry Pénard, 2019. "Multimarket Contact and Platform Competition: Reassessing the Mutual Forbearance Hypothesis," Economics Working Paper Archive (University of Rennes & University of Caen) 2019-07, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    10. Jeroen Hinloopen & Stephen Martin, 2015. "Introduction: 40 Years of Areeda–Turner," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(3), pages 205-207, May.
    11. Andrikopoulos, A. & Dassiou, X., 2018. "Exchange-rate exposure in a “Rule of Three” Model," Working Papers 18/02, Department of Economics, City University London.
    12. Michael L. Katz, 2019. "Multisided Platforms, Big Data, and a Little Antitrust Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(4), pages 695-716, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lapo Filistrucchi & Damien Geradin & Eric van Damme, 2012. "Identifying Two-Sided Markets," Working Papers - Economics wp2012_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    2. 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.
    3. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    4. Marco Antonielli & Lapo Filistrucchi, 2011. "Collusion and the political differentiation of newspapers," Working Papers 11-26, NET Institute, revised Nov 2011.
    5. Filistrucchi, L. & Gerardin, D. & van Damme, E.E.C. & Keunen, S. & Klein, T.J. & Michielsen, T.O. & Wileur, J., 2010. "Mergers in Two-Sided Markets - A Report to the NMa," Other publications TiSEM f901d1fe-8878-444e-a685-8, Tilburg University, School of Economics and Management.
    6. Charles Angelucci & Julia Cagé, 2019. "Newspapers in Times of Low Advertising Revenues," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 319-364, August.
    7. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    8. Justus Haucap & Torben Stühmeier, 2016. "Competition and antitrust in Internet markets," Chapters, in: Johannes M. Bauer & Michael Latzer (ed.), Handbook on the Economics of the Internet, chapter 9, pages 183-210, Edward Elgar Publishing.
    9. repec:spo:wpmain:info:hdl:2441/4edekc99or8n2bu86nu4ua8adl is not listed on IDEAS
    10. repec:hal:spmain:info:hdl:2441/4edekc99or8n2bu86nu4ua8adl is not listed on IDEAS
    11. Behringer, Stefan & Filistrucchi, Lapo, 2015. "Hotelling competition and political differentiation with more than two newspapers," Information Economics and Policy, Elsevier, vol. 30(C), pages 36-49.
    12. Federico Boffa & Lapo Filistrucchi, 2014. "Optimal Cartel Prices in Two-Sided Markets Access," Working Papers 14-19, NET Institute.
    13. Affeldt, P. & Argentesi, E. & Filistrucchi, Lapo, 2021. "Estimating Demand with Multi-Homing in Two-Sided Markets," Other publications TiSEM 1317bf39-d02e-4f61-a34f-e, Tilburg University, School of Economics and Management.
    14. Charles Angelucci & Julia Cagé & Michael Sinkinson, 2024. "Media Competition and News Diets," American Economic Journal: Microeconomics, American Economic Association, vol. 16(2), pages 62-102, May.
    15. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    16. repec:spo:wpmain:info:hdl:2441/4ec86lkes59hv9tfv77ld1p5fr is not listed on IDEAS
    17. 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.
    18. repec:hal:spmain:info:hdl:2441/4ec86lkes59hv9tfv77ld1p5fr is not listed on IDEAS
    19. Lapo Filistrucchi & Tobias J. Klein, 2013. "Price Competition in Two-Sided Markets with Heterogeneous Consumers and Network Effects," Working Papers 13-20, NET Institute.
    20. Doh-Shin Jeon & Nikrooz Nasr, 2016. "News Aggregators and Competition among Newspapers on the Internet," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 91-114, November.
    21. Ivaldi, Marc & Sokullu, Senay & Toru, Tuba, 2015. "Airport Prices in a Two-Sided Market Setting: Major US Airports," CEPR Discussion Papers 10658, C.E.P.R. Discussion Papers.
    22. Oliver Budzinski & Annika Stöhr, 2019. "Competition policy reform in Europe and Germany – institutional change in the light of digitization," European Competition Journal, Taylor & Francis Journals, vol. 15(1), pages 15-54, January.
    23. S. Sriram & Puneet Manchanda & Mercedes Bravo & Junhong Chu & Liye Ma & Minjae Song & Scott Shriver & Upender Subramanian, 2015. "Platforms: a multiplicity of research opportunities," Marketing Letters, Springer, vol. 26(2), pages 141-152, June.
    24. Ginger Zhe Jin & Marc Rysman, 2015. "Platform Pricing at Sports Card Conventions," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 704-735, December.

    More about this item

    Keywords

    predation; market definition; two-sided markets; network effects; daily newspapers;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:frz:wpaper:wp2014_10.rdf. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giorgio Ricchiuti (email available below). General contact details of provider: https://edirc.repec.org/data/defirit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.