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TPRC47: Research Conference on Communications, Information and... has ended
Friday, September 20 • 9:00am - 9:33am
Multisided Markets and Platform Dominance

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Abstract
The internet giants – Facebook, Amazon, Apple, Microsoft, and Google – have transformed society with both positive and negative effects. The negative effects have been stark. There have been huge disruptions caused by e-commerce. More recently, subtler, but even more serious negative effects are only now being recognized: threats to democracy, violations of privacy, and monopolistic behavior.

By traditional measures Facebook and Google are highly concentrated. Each has obtained de facto monopolistic or oligopolistic power with little concern on the part of government.

Facebook and Google and other internet giants are multisided markets (MSM); their economic rents are “hidden” from the public. On the user-side of the market, prices are zero – “free.” On the other side of the market, Facebook’s and Google’s revenues are derived from advertising which appears when the users click on advertisers’ web sites. Facebook and Google can extract exorbitant prices for ads, since they are virtually the only source that can target ads directly to potential customers. This is where the economic rents are not so obvious.

This paper addresses the monopolistic aspect of the internet giants. In the single-sided market, monopoly pricing is well defined – as well as tests for predatory behavior; not so with multisided markets. Since the definition of markets is central to the legal enforcement of antitrust statutes, the paper examines non-transactional multisided markets for their potential for determining consumers’ harm and welfare effects, as well as defining monopoly and predatory pricing in this context. Initial estimates of Google’s and Facebook’s social cost in terms of consumers’ welfare loss are $54 and $33 billion, respectively, an increasing cost to consumers of at least $87 billion dollars including the dead-weight loss. It demonstrates and quantifies that dominant internet platforms can create three major harms to consumers:

• Increasing prices to consumers via added costs to the products being advertised,

• Elimination (or non-emergence) of competition in markets to the products being advertised,

• Increasing prices to consumers beyond the cost of advertising via the market power of the remaining firms in the market of the products being advertised.

The paper outlines potential remedies to ameliorate the problems. 


Moderators
KS

Kristian Stout

International Center for Law and Economics

Speakers
EB

Edmond Baranes

University of Montpellier
PR

Paul Rappoport

Temple University
avatar for James Alleman

James Alleman

Professor Emeritus, University of Colorado Boulder
James Alleman is Professor Emeritus at the University of Colorado – Boulder and a Senior Fellow and Director of Research at Columbia Institute of Tele-Information (CITI), Columbia Business School, Columbia University. Dr. Alleman was Visiting Professor CIMBA Italy , Paderno del... Read More →


Friday September 20, 2019 9:00am - 9:33am
NT08 WCL, 4300 Nebraska Ave, Washington DC

Attendees (37)