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10 J. Comp. L. & Econ. 293 (2014)
Market Definition in Two-Sided Markets: Theory and Practice

handle is hein.journals/jrcolaec10 and id is 297 raw text is: Journal of Competition Law &Economics, 10(2), 293 339 doi: 10.1093/joclec/nhuOO7 MARKET DEFINITION IN TWO-SIDED MARKETS: THEORY AND PRACTICE Lapo Filistrucchi,* Damien Geradint Eric van Damme* & Pauline Affeld{ ABSTRACT Drawing from the economics of two-sided markets, we provide suggestions for the definition of the relevant market in cases involving two-sided platforms, such as media outlets, online intermediaries, payment cards companies, and auction houses. We also discuss when a one-sided approach may be harmless and when instead it can potentially lead to a wrong decision. We then show that the current practice of market definition in two-sided markets is only in part consistent with the above sug- gestions. Divergence between our suggestions and practice is due to the failure to fully incorporate the lessons from the economic theory of two-sided markets, to the desire to be consistent with previous practice, and to the higher data requirements and the higher complexity of empirical analysis in cases involving two-sided plat- forms. In particular, competition authorities have failed to recognize the crucial dif- ference between two-sided transaction and non-transaction markets and have been misled by the traditional argument that where there is no price, there is no market. JEL: L40; L50; K21 Assistant Professor of Economics, Department of Economics and Management, University of Florence, Italy; CentER & TILEC, Tilburg University, The Netherlands. Email: lapo. filistrucchiTunifi.it. t Professor of Competition Law, TILEC, Tilburg University, The Netherlands; William Cook Global Law Professor, University of Michigan Law School. Email: dgeradinTcov.com. * Professor of Economics, CentER & TILEC, Tilburg University, The Netherlands. Email: eric. vandammeTuvt.nl. Economist, E.CA Economics, Berlin, Germany. Email: affeldtTe-ca.com. The authors thank seminar participants at TILEC work in progress meetings for useful comments and suggestions. The authors also thank Ligia Dorobantu for her assistance in reviewing payment cards cases; Antonio Laurenco, Simone Keunen, Consuelo Silva Buston, and John Wileur, who contributed to the report; Cedric Argenton, Angelos Dimopoulos, Ron Kemp, Matteo Negrinotti, Bastiaan Overvest, Tjarda van der Vijver, and Bjbm Vroomen for useful comments; and Sarah Charette for valuable research assistance. This article draws on Mergers in Two Sided Market: A Report to the NMa prepared by TILEC and Howrey for the Nederlandse Mededingingsautoriteit (NMa) (Dutch Competition Authority). The authors thank the NMa for financial support; Lapo Filistrucchi and Pauline Affeldt acknowledge financial support from a Microsoft grant to TILEC. In both cases, funding was provided in accordance with the KNAW Declaration of Scientific Independence. The views expressed in the report and in this article are not necessarily the views of the NMa, the Microsoft Corporation, or E.CA Economics. All remaining errors are the authors' own. (cIhe Author (2014). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com

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