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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/28504

Title: Price Discrimination in Two-Sided Markets
Authors: Liu, Qihong - University of Oklahoma
Serfes, Konstantinos - Drexel University
Keywords: Price discrimination; Two-sided markets; Indirect network externalities; Market segmentation
Issue Date: 2007
Series/Report no.: NET Institute Working Paper;07-25
Abstract: We examine the profitability and the welfare implications of price discrimination in two-sided markets. Platforms have information about the preferences of the agents that allows them to price discriminate within each group. The conventional wisdom from one-sided horizontally differentiated markets is that price discrimination hurts the firms and benefits consumers, prisoners' dilemma. Moreover, it is well-known that the presence of indirect externalities in two-sided markets can intensify the competition. Despite all these, we show that the possibility of price discrimination, in a two-sided market, may actually soften the competition. Therefore, the implications of price discrimination from one-sided markets may not carry over to two-sided markets. This is the case regardless of whether prices are public or private, although private prices boost profits. Our analysis also sheds light on the welfare properties of price discrimination in intermediate goods markets, such as Business-to-Business (B2B) markets.
URI: http://hdl.handle.net/2451/28504
Appears in Collections:NET Institute Working Papers Series

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