Enrico Böhme’s research while affiliated with Philipps University of Marburg and other places

We analyse the optimal location choice of a monopolistic firm that operates two arbitrarily located platforms on a two-sided market. By extending the traditional Hotelling framework, we show that the optimal platform locations are equivalent to the one-sided benchmark if both sides are either restricted to single- or multi-homing. In the mixed case (one side single-homes, the other one multi-homes), the optimal platform locations are in line with the respective symmetric case. If the monopolist is restricted to choosing the same location on either side of the market, the optimal locations are determined by the relative profitability of the market sides. © 2016 Board of Trustees of the Bulletin of Economic Research and John Wiley & Sons Ltd.

We make a case for price-increasing competition on “competitive bottleneck” two-sided markets. Unlike previous literature on price-increasing competition and two-sided markets, we abstract from product/platform differentiation, structural differences, scale effects, search costs, and capacity constraints, which would per se favor the one or the other market structure. We argue that demand interrelation as given on many competitive bottleneck two- sided markets might be sufficient to cause either no observable price effect of competition or price-increasing competition under certain conditions. We derive these conditions and illustrate the economic intuition. Under price equality, virtually everything except for the number of platform operators is identical in monopoly and duopoly. Nevertheless, total demand on both market sides in the duopoly market exceeds total demand in the monopoly market. Furthermore, even though there is no observable price effect, there is still a competitive effect that becomes manifest in total duopoly equilibrium profits being strictly smaller than monopoly profits. The relationship of total welfare is ambiguous in subsidization cases, while it is strictly greater in duopoly, if no subsidization takes place.

The present paper provides a descriptive analysis of the second-degree price discrimination problem on a monopolistic two-sided market. By imposing a simple two-sided framework with two distinct types of agents on one of its market sides, it will be shown that under incomplete information, the extent of platform access for high-demand agents is strictly reduced below the benchmark level (complete information). In addition, the paper’s findings imply that it is feasible in the optimum to charge higher payments from low-demand agents if the extent of interaction with agents from the opposite market side is assumed to be bundle-specific.

The literature on the effects of market concentration in platform industries or two-sided markets often compares the competitive outcome against a benchmark. This benchmark is either the “joint management” solution in which one decision maker runs all platforms or a “pure” monopoly with just one platform. Literature has not generally discussed, which benchmark is the appropriate one. We show that the appropriate benchmark, i.e. how many platforms the monopolist will operate, depends on whether agents multi- or singlehome, whether the externalities are positive or negative, and in some cases on the properties of the demand functions. Different situations require different benchmarks. Our results also help to anticipate the effects of proposed platform mergers, where the assessment might crucially depend on the number of platforms after a merger.

We use a set of German micro data to study the relationship between mainstream and art house movie theaters. We find that both types of cinema have a significant price effect within their own group, but there is no significant price effect between the two types. Furthermore, we provide an example for the biased results that occur, if both types of movie theaters are pooled into one regression. Doing so, we demonstrate that it is important, to carefully distinguish mainstream and art house facilities in empirical studies of the movie theater industry.

We propose both a monopoly and a duopoly model of a two-sided market. Both settings are fully comparable, as we impose a homogeneous good produced at zero costs without capacity constraints, as well as identical parameterization of market sizes. We determine the duopoly equilibrium and the monopoly optimum in terms of the parameters and obtain solutions with and without subsidization (prices below marginal cost) of one market side. We show that there exists a continuum of economically plausible parameter sets for which duopoly equilibrium prices exceed optimal monopoly prices and one with no observable price effect of competition, i.e. one where optimum and equilibrium prices become equal. Despite the fact that virtually everything except for the number of platform operators is identical in the latter situations, total demand on both market sides in the duopoly market exceeds total demand in the monopoly market. Furthermore, even though there is no observable price effect, there is still a competitive effect in so far that total profits in the duopoly equilibrium are strictly smaller than monopoly profits. The relationship of total welfare is ambiguous in subsidization cases, while it is strictly greater in duopoly, if no subsidization takes place. Our results sharply contradict economic intuition and common economic knowledge from one-sided markets.

The empirical relationship between market concentration and prices has been well established for a long time and for numerous industries. Recently itwas confirmed for the USmovie theater industry. This paper investigates, whether such a price-concentration relationship can be found on local cinema markets in Germany as well, focusing on up-to-date mainstream movies. First, we develop a model of monopolistic pricing and estimate its parameters using data of monopoly markets from a new set of German micro data. Then we apply the estimated model to simulate monopoly prices on local markets with two or more operators and compare them to the prices actually observed in these markets. We find no significant difference in admission prices, which puts our study in contrast to the results found on local US markets. Searching for an explanation, we test whether movie theater operators even though being located in the same geographic area, are local monopolists, but find no hint of that, either.