Chicken and egg: competition among intermediation service providers

B Caillaud, BM Jullien

Research output: Contribution to journalArticle (Academic Journal)peer-review

703 Citations (Scopus)

Abstract

We analyze a model of imperfect price competition between intermediation service providers. We insist on features that are relevant for informational intermediation via the Internet: the presence of indirect network externalities, the possibility of using the nonexclusive services of several intermediaries, and the widespread practice of price discrimination based on users' identity and on usage. Efficient market structures emerge in equilibrium, as well as some specific form of inefficient structures. Intermediaries have incentives to propose non-exclusive services, as this moderates competition and allows them to exert market power. We analyze in detail the pricing and business strategies followed by intermediation service providers.
Translated title of the contributionChicken and egg: competition among intermediation service providers
Original languageEnglish
Pages (from-to)309 - 328
Number of pages20
JournalRAND Journal of Economics
Volume34 (2)
Publication statusPublished - Jun 2003

Bibliographical note

Publisher: Allen Press

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