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"Superstars in two-sided markets: exclusives or not?" (Joint with Elias Carroni and Shiva Shekhar)

Thursday 31 May 2018, 1.00PM to 2.00pm

Speaker(s): Leonardo Madio

Abstract: Video-games, music- and video-on-demand platforms, newspapers have often relied on exclusive contracts to compete with rivals. This paper presents a model with competing platforms acting as intermediaries to consumers on the one side and content providers on the other side. There are two types of content providers differing in terms of how consumers value them: a superstar and a mass of small content providers. Our findings are along three lines. First, the superstar's exclusive creates more content provision and an endogenous asymmetry between platforms, inducing also the small content providers to sign exclusive contracts (ripple effect). Moreover, the superstar has an incentive to offer a take-or-leave-it exclusive contract whenever the downstream market for consumers is sufficiently competitive. Overall, exclusive contracts benefit consumers relative to the case where the superstar is absent or she offers the contract to both platforms, whereas non-exclusivity may reduce consumer surplus. From a policy perspective, a ban on exclusivity should not be enforced by policymakers.

Location: A/EC202 Economics Staff Room

Admission: Staff and PhD Students