# 15-080/II (2015-07-06)

Author(s)
Yuyu Zeng, VU University Amsterdam, the Netherlands; Harold Houba, VU University Amsterdam, the Netherlands; Gerard van der Laan, VU University Amsterdam, the Netherlands
Keywords:
Competition economics, two-sided market
JEL codes:
D4, L4

We extend the models in ("Competition in two-sided markets" of Armstrong (2006, Rand Journal of Economics) by adding within-group externalities. In the monopoly and duopoly cases, positive within-group externalities reduce the price of the own group. Negative externalities have an opposite price effect. In the case of a competitive bottleneck, we show by examples that within a certain range of parameter values, a novel phenomenon arises that the platform attracts more agents from one of the groups compared with the social optimum.