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 contribution||Chicken and egg: competition among intermediation service providers|
|Pages (from-to)||309 - 328|
|Number of pages||20|
|Journal||RAND Journal of Economics|
|Publication status||Published - Jun 2003|