Two-Sided Markets with Negative

Two-Sided Markets with Negative Externalities 1 This paper analyses a two-sidedmarket in which two platforms compete against each other. One side, the advertisers, exerts a negative externality on the other side, the users. It is shown that if platforms can charge advertisers only, a higher degree of competition for users can lead to higher profits because competition on the advertis-ers ’ side is reduced. If platforms can charge users as well, profits might increase or decrease, the latter because of increased competition through the additional instru-ment of the user fee. Nevertheless the equilibrium with user fee is more efficient. Two-Sided Markets with Negative Externalities 2