One Sided Access in Two-Sided Markets

Abstract

In this paper, I analyze the incentives of a monopolistic platform to open its infrastructure to an entrant on the buyer side of the market. If buyer and seller demands are linear and identical, and if the entrant operates on a separate market, I show that entry distorts the price structure in favor of sellers. I also show that the entrant's profits may increase with the access charge if seller demand is very elastic to prices, because the entrant values the presence of sellers on the platform. If the entrant competes with the platform, its profits may also increase with the access charge if prices are strategic complements and if the degree of product differentiation is sufficiently low.