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?

• Distinguish 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

• Business models may differ: Pay versus free TV
• Patterns of substitution may differ on the two sides
• The 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

Bruno Jullien, ACE 2014 2

Sport journals Cultural journals National news Advertisers sport fans culture fans

Market definition

 Should define market at the product level?

• Multiple markets may lead to ignore some important cross-side

interactions

 When defining several relevant markets for platforms

• Analyze market power accounting for

– Opportu rtunity nity cost in each market – Leverag age of position on one side on the other side

• 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)

• 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

Bruno Jullien, ACE 2014 5

Theory of arm: A simplified Mussa-Rosen

consumers preferred quality incumbent Monopoly incumbent Duopoly incumbent head-to-head competition

Bruno Jullien, ACE 2014 6

Defense: A simplified Mussa-Rosen

Duopoly incumbent Defense incumbent

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

• issue of demand uncertainty
• 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