Price-Increasing Competition on Two-Sided Markets with Homogeneous Platforms

We make a case for price-increasing competition on "competitive bottleneck" two-sided markets. We argue that demand interrelation might be sufficient to cause either no observable price effect of competition or price-increasing competition. Under price equality, total demand on both market sides in the duopoly market exceeds total demand in the monopoly market. Furthermore, even though there is no observable price effect, there is still a competitive effect that becomes manifest in total duopoly equilibrium profits being strictly smaller than monopoly profits. The relationship of total welfare is ambiguous in subsidization cases, while without subsidization, welfare is strictly greater in duopoly. © 2012 Springer Science+Business Media New York.