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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.
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