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Journal of Competition Law and Economics Advance Access originally published online on May 30, 2008
Journal of Competition Law and Economics 2008 4(3):663-695; doi:10.1093/joclec/nhn017
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© The Authors (2008). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

THE ANALYSIS OF MERGERS THAT INVOLVE MULTISIDED PLATFORM BUSINESSES

David S. Evans * and Michael D. Noel **

Correspondence: E-mail: devans{at}lecg.com.

A multisided platform (MSP) serves as an intermediary for two or more groups of customers who are linked by indirect network effects. Recent research has found that MSPs are significant in many industries and that some standard economic results—such as the Lerner Index—do not apply to them, in material ways, without some significant modification to take linkages between the multiple sides into account. This article extends several key tools used for the analysis of mergers to situations in which one or more of the suppliers are MSPs. It shows that the application of traditional tools to mergers involving MSPs results in biases, the direction of which depends on the particular tool being used and other conditions. It also extends these tools to the analysis of the merger of MSPs. The techniques are illustrated with an application to an acquisition involving the multisided online advertising industry.

* Visiting Professor, Department of Laws, University College London; Vice Chairman, LECG, LLC.

** Assistant Professor, Department of Economics, University of California at San Diego. E-mail: mdnoel{at}ucsd.edu. This paper is an extensive revision of a paper that previously circulated under the title "Analyzing Market Power and Market Definition in Multi-Sided Platform Markets." We would like to thank Howard Chang, Kirsten Edwards, Andrei Hagiu, Alison Oldale, Michael Salinger, Richard Schmalensee, and Vanessa Yanhua Zhang for valuable comments and Murtaza Akhter, Eri Budo, Marina Danilevsky, and Nese Nasif for exceptional research assistance.


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