Le 10 Sport / LEquipe Bruno Jullien Toulouse School of Economics - PowerPoint PPT Presentation

Le 10 Sport / L’Equipe Bruno Jullien Toulouse School of Economics ACE 6 November 2014

Market definition  Should we define market at the platform level? oDistinguish between pure two-sided markets and hybrid – Pure: credit card, dating agency, e-commerce intermediaries, matching – Hybrid: media, Smartphone, Amazon, Google search  A single product market may not capture the reality for hybrid two-sided markets oBusiness models may differ: Pay versus free TV oPatterns of substitution may differ on the two sides oThe nature of competitive constraints depend on the multi- homing / single homing on each side – A firm may have to compete for advertisers but not for consumer Bruno Jullien, ACE 2014 1

Market definition Advertisers Sport Cultural National journals journals news sport fans culture fans Bruno Jullien, ACE 2014 2

Market definition  Should define market at the product level? o Multiple markets may lead to ignore some important cross-side interactions  When defining several relevant markets for platforms o Analyze market power accounting for – Opportu rtunity nity cost in each market – Leverag age of position on one side on the other side o Adapt SSNIP test – Non adjusted one-sided test: narrow market (ignore ad revenue loss) – 2SM with fixed price on the other side: large market (ignore ad price adjustment) o If a practice affects a market where the firm is dominant then include lude all rel elevan evant markets rkets in the analysis (not only those where the platform is dominant) Bruno Jullien, ACE 2014 3

Bruno Jullien, ACE 2014 4

Theory of arm: A simplified Mussa-Rosen consumers preferred quality incumbent incumbent incumbent head-to-head Monopoly Duopoly competition Bruno Jullien, ACE 2014 5

Defense: A simplified Mussa-Rosen incumbent incumbent Duopoly Defense Bruno Jullien, ACE 2014 6

Theory of harm: war of attrition? Model  Monopoly profit: Π  Entry with accommodation: The incumbent obtains flow profit A and the entrant obtains positive flow  profit Entry with copycat: The incumbent obtains flow profit A-L and the entrant obtains negative flow profit  Consider the game where at each date, simultaneously  The incumbent decides to continue to fight or stop  The entrant decides to stay or exit  There is an equilibrium where the incumbent accommodates at first date with profit A/(1- δ)  War of attrition: If L<(Π –A) δ /(1 - δ) , there is an equilibrium where in each period  the incumbent fights with positive probability  the entrant exits with positive probability  In the war of attrition the expected profit of the incumbent is A/(1- δ)+L/ δ  The equilibrium war of attrition is preferred by the incumbent  It is socially inefficient  Bruno Jullien, ACE 2014 7

Burden of proof  Who has made its case  The Adc has not really demonstrated that the strategy was non- profitable without exit of 10Sport o issue of demand uncertainty o nothing is said about the long-term perspective  But L’Equipe has not demonstrated that the strategy was better than other options without considering the eviction effect.  Issue with defining « sacrifice » for non-price strategies  Burden of proof? Bruno Jullien, ACE 2014 8