Regardless of whether one defines a single, multisided market or a set of closely linked one-sided markets
, courts should continue to apply separate-effects analysis.
A recurring topic in the two-sided markets literature concerns the definition of two-sided markets, and their differences with one-sided markets. (53) Rochet and Tirole explained early on that "you know it when you see it"--type definitions would be inappropriate.
Interestingly, Rochet and Tirole complemented this with a definition of one-sided markets:
Building on the previous discussion, the price structure in two-sided markets is more complex than in one-sided markets. For example, following ROCHET & TIROLE (2006) a formula very similar to the traditional Lerner Index can be derived if only transaction fees and no fixed costs or benefits are considered.
Whether a service provider wants to act as an intermediary, thus operating a two-sided market model (e.g., Ebay, Google Search, Facebook, Youtube as well as almost all other advertisement-supported free services) or as its own service provider, thus operating a one-sided market model (e.g., Netflix, WhatsApp) is usually a deliberate choice of the respective firm.
Subsequent analysis has introduced market imperfections into the analysis of two-sided payment markets that has generated some interesting contrasts with imperfections in typical one-sided markets
. In one-sided markets
, a monopoly harms consumers by restricting output and raising price.
Because many industrial products are custom-made to buyers' specifications, they exhibit the characteristic of being single-buyer, one-sided markets
. Because of the strict requirements for counterparty indifference and product standardization, neutral exchanges have been less prevalent.
The early literature was mostly focused on price theory, explaining difference between pricing in multi-sided markets and one-sided markets
by emphasizing the need to coordinate users and bring all sides on board.
The economics literature on platforms and two-sided markets shows that applying insights from the analysis of one-sided markets
to two-sided markets might be misleading.
This argument is about one-sided markets
and tells us nothing about the paid prioritization arrangements that broadband providers want to impose.
For instance, whereas the structure of prices does not play a role in "one-sided markets
", it does in two-sided markets; in other words, the effect of competition in two-sided markets might be surprising.
In this case there is a "multiplier" effect, as a price increase reduces demand more than in standard one-sided markets
. In the case of advertising-supported media, on the other hand, imagine the platform increases the price it charges one side (advertisers).