Template-Type: ReDIF-Paper 1.0
Author-Name:  Richard Schmidtke
Author-X-Name-First: Richard
Author-X-Name-Last: Schmidtke

Title:  Two–Sided Markets with Pecuniary and Participation Externalities
Abstract: The existing literature on "two-sided markets" addresses partici-
pation externalities, but so far it has neglected pecuniary externalities
between competing platforms. In this paper we build a model that
incorporates both externalities. In our setup di®erentiated platforms
compete in advertising and o®er consumers a service free of charge
(such as a TV program) that is ¯nanced through advertising. We show
that advertising can exhibit the properties of a strategic substitute or
complement. Surprisingly, there exist cases in which platforms bene¯t
from market entry. Moreover, we show that from a welfare point of
view perfect competition is not always desirable.
Length:  47 pages
Creation-Date:  2006-06
File-URL: http://www.bgpe.de/texte/DP/003_schmidtke.pdf
File-Format: Application/pdf
File-Function: First version, 2006
Number: 003
Classification-JEL: D43, L13, L82
Keywords: two-sided markets, broadcasting, advertising, market entry, digi-
tal television
Handle: RePEc:bav:wpaper:003_schmidtke