NO : WP-2018-024
AUTHOR : Swapnil Sharma
TITLE : Competition in Two Sided Markets with Congestion
ABSTRACT :
Two sided markets involve two groups of agents who interact via “platforms”. This paper analyses
competition in a two sided market with congestion. The existing literature’s on pricing mechanisms of
two-sided markets has concluded that pricing mechanism depends on the following three factors:
relative size of cross group externalities, fixed price or per transaction charge by platform, and single
homing or multiple homing of agents. This paper extends the analysis by including the effect of
congestion on pricing mechanisms in a two sided market. It concludes that in the case of single homing
of agents, profits of the platform increase due to congestion if the agents have a low tolerance level,
whereas in the case of multi homing, profits of the platform increase due to congestion if the agents
have a high tolerance level.
Keywords: Network externalities, Congestion
JEL Code : L10, L11, L14, D43
Weblink :http://www.igidr.ac.in/pdf/publication/WP-2018-024.pdf
