Martin Peitz

Universität Mannheim ·  Department of Economics

We introduce advertising congestion along with a time use model of consumer choice among media. Both consumers and advertisers multihome. Higher equilibrium advertising levels ensue on less popular media platforms because platforms treat consumer attention as a common property resource: smaller platforms internalize less of the congestion from adve...

Digital platforms have reshaped many product markets and play an increasingly important role in economies around the globe. Some of these platforms have become powerful players and may possess a lot of market power. Economists use a number of indicators to assess market power. In this article we discuss to which extent these indicators are helpful...

Platform competition can be intense when offering non-differentiated services. However, competition is somewhat relaxed if platforms cannot set negative prices. If platforms collude they may be able to implement the outcome that maximizes industry profits. In an infinitely repeated game with perfect monitoring, this is feasible if the discount fact...

We match data on performance in a multiple‐choice exam with data on risk preferences from a classroom experiment. More‐loss‐averse students leave more questions unanswered and perform worse in the exam when giving an incorrect answer is penalized compared to not answering. Loss aversion parameters extracted from lottery choices in a controlled expe...

In many economic sectors – the digital industries being first and foremost – the market power of dominant firms has been steadily increasing and is rarely challenged by competitors. Existing competition laws and regulations have been unable to make markets more contestable. The book argues that a new competition tool is needed: market investigation...

In many economic sectors – the digital industries being first and foremost – the market power of dominant firms has been steadily increasing and is rarely challenged by competitors. Existing competition laws and regulations have been unable to make markets more contestable. The book argues that a new competition tool is needed: market investigation...

The article addresses the role market definition can play for EU competition practice in the platform economy. The focus is on intermediaries that bring together groups of users whose decisions are interdependent, which therefore are commonly referred to as ‘two-sided platforms’. We address challenges to market definition that accompany these cross...

We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This is compatible with hig...

Digital platforms controlled by Alibaba, Alphabet, Amazon, Facebook, Netflix, Tencent and Uber have transformed not only the ways we do business, but also the very nature of people's everyday lives. It is of vital importance that we understand the economic principles governing how these platforms operate. This book explains the driving forces behin...

Digital platforms controlled by Alibaba, Alphabet, Amazon, Facebook, Netflix, Tencent and Uber have transformed not only the ways we do business, but also the very nature of people's everyday lives. It is of vital importance that we understand the economic principles governing how these platforms operate. This book explains the driving forces behin...

In this chapter, we consider the strategies that platforms can use first to launch their operations and, later, to expand them. In Section 4.1, we explore the economic trade-offs for a firm of choosing a (two- sided) platform model rather than alternative modes of organization. For firms adopting the two-sided platform model, we then expose the dif...

In this chapter, we take a closer look at how the strategies of a profit-maximizing two-sided platform affect user participation and usage in a buyer-seller context. First, in Section 6.1, we introduce competition between sellers on the platform and analyze how this affects platform pricing and design; we also assess the impacts of the platform’s d...

Digital platforms controlled by Alibaba, Alphabet, Amazon, Facebook, Netflix, Tencent and Uber have transformed not only the ways we do business, but also the very nature of people's everyday lives. It is of vital importance that we understand the economic principles governing how these platforms operate. This book explains the driving forces behin...

In this chapter, we analyze the economics behind the use of big data and, in particular, ratings, reviews, and recommendations that have become mainstream on digital platforms. We start in Section 2.1 by analyzing rating and review systems. These systems provide platform users with information about either products or their counterparties to a tran...

In this chapter, we examine how a platform, which has passed the launch phase, prices its services. In Section 5.1, we provide a general introduction to platform pricing by describing the different types of prices that a platform might choose, by going through a simple numerical example, and by discussing why the platform’s decisions may diverge fr...

In this chapter, we analyze various forms of network effects. As a network effect is an external effect, it is important to identify the economic agent who generates it (the “originator”) and the one who is affected (the “receiver”). If originator and receiver are seen to belong to a common group of agents, one talks of a “within- group” network ef...

In this chapter, we seek to understand key economic consequences of network effects. First, in Section 3.1, we analyze the impacts that network effects have on the demand for participation on a platform. The main lesson we draw is that the interdependence between individual demands leads to unconventional aggregate demands; in particular, we show t...

Digital platforms controlled by Alibaba, Alphabet, Amazon, Facebook, Netflix, Tencent and Uber have transformed not only the ways we do business, but also the very nature of people's everyday lives. It is of vital importance that we understand the economic principles governing how these platforms operate. This book explains the driving forces behin...

I. Introduction Around the globe, legislatures have become active in providing competition authorities with new tools and resources to deal with competition concerns around large digital platforms. Germany is one of the countries at the forefront of these developments. On 18 January 2021, the German legislature adopted the Tenth Amendment to the Ge...

The focus of the law on competition damages is on the recovery of overcharges appropriated by the cartels. Parties other than purchasers are often neglected, not only as a matter of judicial practice but also due to legal restrictions. We argue that a narrow concept of standing – which excludes parties that supply either the cartels or the firms th...

We consider two-sided platforms with the feature that some users on one or both sides of the market lack information about the price charged to participants on the other side of the market. With positive cross-group external effects, such lack of price information makes demand less elastic. A monopoly platform does not benefit from opaqueness and o...

A project leader sources an input from a supporter and combines it with an input produced in‐house. The leader has private information about the project's cost environment. We show that if the leader can commit to the in‐house input level, the input ratio is distorted upward when the in‐house input is not too costly—the in‐house input is produced i...

On many two‐sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition...

This paper analyzes a mechanism through which a supplier of unknown quality can overcome its asymmetric information problem by selling via a reputable downstream firm. The supplier's adverse-selection problem can be solved if the downstream firm has established a reputation for delivering high quality with the supplier. The supplier may enter the m...

The rise and success of digital platforms (such as Airbnb, Amazon, Booking, Expedia, Ebay, and Uber) rely, to a large extent, on their ability to address two major issues. First, to effectively facilitate transactions, platforms need to resolve the problem of trust in the implicit or explicit promises made by the counterparties; they post reviews a...

The rise and success of digital platforms (such as Airbnb, Amazon, Booking, Expedia, Ebay, and Uber) rely, to a large extent, on their ability to address two major issues. First, to effectively facilitate transactions, platforms need to resolve the problem of trust in the implicit or explicit promises made by the counterparties; they post reviews a...

Competition between two-sided platforms is shaped by the possibility of multihoming. If users on both sides singlehome, each platform provides users on either side exclusive access to its users on the other side. In contrast, if users on one side can multihome, platforms exert monopoly power on that side and compete on the singlehoming side. This p...

We consider product markets in which single-product firms sell differentiated products to consumers through an intermediary. Consumers are interested only in a specific product category, but do not know before inspection which products belong to this category. An intermediary knows each consumer’s preferred product category and which products belon...

We survey the economics literature on media as it applies to the Internet. The Internet is an important driver behind media convergence and connects information and communication technologies. While new Internet media share some properties with traditional media, several novel features have appeared: On the content side, aggregation by third partie...

Suchmaschinen ermöglichen Nutzern einen schnellen Zugang zu Informationen, die sie konkret suchen oder dort erst entdecken. Sie haben sich zu wichtigen Informationsintermediären entwickelt. In der breit geführten Debatte über eine mögliche Regulierung von Suchmaschinen sprechen sich die Autoren gegen eine Ex-ante-Regulierung aus. Das Wettbewerbsrec...

We study optimal experimentation by a monopolistic platform in a two-sided market. The platform provider is uncertain about the strength of the externality each side is exerting on the other. Setting participation fees on both sides, it gradually learns about these externalities by observing actual participation levels. This provides an information...

The last decade has seen a strident public debate about the principle of “net neutrality.” The economic literature has focused on two definitions of net neutrality. The most basic definition of net neutrality is to prohibit payments from content providers to internet service providers; this situation we refer to as a one-sided pricing model, in con...

Whether consumers are aware of potentially adverse product effects is key to private and social incentives to disclose information about undesirable product characteristics. In a monopoly model with a mix of aware and unaware consumers, a larger share of unaware consumers makes information disclosure less likely to occur. Since the firm is not inte...

Under strict net neutrality Internet service providers (ISPs) are required to carry data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate the short-run effects of different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use con...

In this paper we develop a reputation model of patenting in which a firm in equi-librium may decide to only apply for a patent whenever a truly patentable idea has been generated. Firms have a short-run incentive to deviate and receive cer-tain rents from pending patents, as well as potential rents from PTO mistakes in granting patents. We construc...

Cambridge Core - Strategic Management - Industrial Organization - by Paul Belleflamme

Thoroughly revised according to classroom feedback, Industrial Organization: Markets and Strategies offers an up-to-date and rigorous presentation of modern industrial organization that blends theory with real-world applications and derives implications for firm strategy and competition policy. This comprehensive textbook acquaints readers with the...

We analyze a consumer-choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. Participants differ in their reported taste for the two sandwiches and in their degree of loss av...

Lecture slides on Competition and Regulation in Two-Sided Markets

This paper provides a description of the crowdfunding sector, considering investment based crowdfunding platforms as well as platforms in which funders do not obtain monetary payments. It lays out key features of this quickly developing sector and explores the economic forces at play that can explain the design of these platforms. In particular, it...

Under strict net neutrality Internet service providers (ISPs) are required to carry data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control technique...

This paper provides a description of the crowdfunding sector, considering investment-based crowdfunding platforms as well as platforms in which funders do not obtain monetary payments. It lays out key features of this quickly developing sector and explores the economic forces at play that can explain the design of these platforms. In particular, it...

We study information disclosure in a vertically differentiated duopoly with unaware consumers. Sellers have private information about the adverse effect of their products, while consumers are unaware of existence of such adverse effect unless they are informed by the sellers. We show that information remains hidden only if information disclosure re...

DefinitionDigital piracy is the act of reproducing, using, or distributing information products, in digital formats and/or using digital technologies, without the authorization of their legal owners.IntroductionThe objective of this entry is to provide a comprehensive and up-to-date overview of digital piracy (this entry summarizes and updates Bell...

This note summarizes and updates our previous survey of the economics of digital piracy (Belleflamme and Peitz, 2012).

Contractual and regulatory provisions for access affect incentives to invest in an upgraded network and, in particular, a next-generation access network. Investment decisions are made under uncertainty and have to be made over time. This papers provides a framework for taking uncertainty, risk aversion, and the timing of investment explicitly into...

In a standard adverse selection world, asymmetric information about product quality leads to quality deterioration in the market. Suppose that a higher investment level makes the realization of high quality more likely. Then, if consumers observe the investment (but not the realization of product quality) before purchase, they can infer the probabi...

Die Einführung neuer Endkundentarife für den festen Internetzugang durch die Deutsche Telekom hat die Netzneutralitätsdebatte erneut befeuert. Dabei geht es um die Frage, ob Endkundenanbieter bei der Übertragung von Daten im Internet bestimmte Dienste oder Inhalte gegen ein vom Sender oder Empfänger zu zahlendes Entgelt priorisieren dürfen. Sowohl...

We study a supply chain relationship in which the buyer outsources production of a component to the supplier. The buyer also produces a component and combines it with the supplier's input to yield the final output. The supplier can upgrade production of his input via costly innovation. Neither the supplier's effort for innovation nor the result of...

We provide a novel explanation for the wasteful product disposal by retailers. In our model, after purchasing a quantity of a product from the manufacturer, the retailer exerts a costly effort to sell the product to the final users. The manufacturer’s production cost and the outside opportunity associated with it is private information. We show tha...

Net neutrality has become a hot topic in politics and among the general public in Europe, even if different people attach different meanings to this term. The central questions are as follows: Which requirements must be met when transmitting data in telecommunication networks, in particular with respect to pricing and prioritising certain content?...

We analyze a model of monopolistic price discrimination where only some consumers are originally sufficiently informed about their preferences, e.g., about their future demand for a utility such as electricity or telecommunication. When more consumers become informed, we show that this benefits also those consumers who remain uninformed, as it redu...

The economic analysis of the digital economy has been a rapidly developing research area for more than a decade. Through authoritative examination by leading scholars, this publication takes a closer look at particular industries, business practices, and policy issues associated with the digital industry. The volume offers an up-to-date account of...