Conference on Platform Markets at ZEW

From 31 May to 2 June 2010, ZEW, the University of Mannheim, the Mannheim Centre for Competition and Innovation and the Collaborative Research Centre Transregio 15 jointly organised a conference on the implications of platform markets in terms of the economics of competition and regulation. 85 national and international researchers from 16 countries attended the event.

Companies in platform markets are faced with various groups of participants, whose demand is interdependent. An illustrative example for a platform market is the credit card market. Holding or accepting a credit card, is an admission requirement – or rather the platform – for entering the market. On the one side are the market participants, namely retailers, restaurants etc., who accept a specific card as a mean of payment, while the customers who use this card are on the other side. In order to succeed, companies in platform markets must take this multilateral nature of trade into account when they, for instance, price their products. From an economic point of view, the characteristics of platform markets raise the question of whether and how these characteristics are taken into account in competition policy analyses, and how regulatory interventions by the government should be designed. Pricing at conventions for collectible cards In his speech, Marc Rysman from Boston University discussed how pricing is determined at conventions for collectible cards. By means of an extensive dataset on so-called Sports Card Conventions in the United States, he investigated the central question of whether the pricing theory finds application in platform markets. In this regard, convention organisers serve as platform that sets admission fees for collectors and participation fees for dealers.  Rysman showed that the admission fees for collectors vary depending on the intensity of competition due to other conventions. On the other hand, he also found that organisers follow a complex pattern when setting participation fees for dealers. According to Rysman’s results, these fees do not respond to competition from competitors in close or medium distances. However, in the case of long distances (more than 100 miles), the fees increase as competition intensifies. While these results are in line with the theory of pricing in platform markets, it is difficult to explain them by means of alternative theoretical models. Multiple Purchases of News Magazines Simon Anderson from the University of Virginia investigated the question of optimal pricing in media markets. Using the market for news magazines as an example, he assumed that while some costumers only buy one magazine, others prefer several different magazines. In general, the extent of this single- or multi-homing depends on the prices as well as the quality of the respective magazines. At first sight, it would seem likely that the probability of multi-homing would increase if the quality of the reports of the respective magazines have is high. Anderson showed, however, that the opposite can be true as well. This is due to the fact that while a high quality increases the attractiveness of the magazines, it also makes it less imperative for interested readers to buy both magazines. Anderson further showed that if the quality is sufficiently high, it can be a dominant strategy for both magazines to increase prices in a way that either no one buys or only those readers who have a great interest in a second opinion purchase both magazines. Apart from the presentations mentioned, renowned researchers presented a broad range of theoretical and empirical research projects in a total of 12 parallel sessions. In addition to the various lectures on media markets, many topics focused on the credit card and computer industry. Kai Hüschelrath E-mail: hueschelrath@zew.de Gordon Klein E-mail: klein@zew.de