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American Economic Journal: Microeconomics: Vol. 1 No. 1 (February 2009)

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Asymmetric Networks in Two-Sided Markets

Article Citation

Ambrus, Attila, and Rossella Argenziano. 2009. "Asymmetric Networks in Two-Sided Markets." American Economic Journal: Microeconomics, 1(1): 17-52.

DOI: 10.1257/mic.1.1.17

Abstract

This paper investigates pricing decisions and network choices in two-sided markets with network externalities. Consumers are heterogeneous in how much they value the externality. Imposing restrictions on the extent of coordination failure among consumers generates clear qualitative conclusions about equilibrium market configurations. Multiple asymmetric networks can coexist in equilibrium, both in the case of a monopolist network provider and in the case of competing providers. These equilibria have the property that one network is cheaper and larger on one side, while the other network is cheaper and larger on the other side. Product differentiation is endogenized by consumers' network choices. (JEL D85, L12, L13, L14, D42, D43)

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Authors

Ambrus, Attila (Harvard U)
Argenziano, Rossella (U Essex)

JEL Classifications

D42: Market Structure and Pricing: Monopoly
D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
D85: Network Formation and Analysis: Theory
L12: Monopoly; Monopolization Strategies
L13: Oligopoly and Other Imperfect Markets
L14: Transactional Relationships; Contracts and Reputation; Networks

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