Competition, Mergers and Exclusive Dealing in Two-Sided Markets with Zero-Price Constraints: The Case of Search Engines

Abstract

In this dissertation, we provide the analysis of the search engine market and investigate possible issues resulting from the search engine competition within the two-sided market framework. Therefore, by incorporating an oligopoly model of competition among two-sided platforms with a zero-price constraint imposed on one side, we, firstly, analyze pricing behavior of search engines, secondly, investigate possible welfare changes resulting from exclusive dealing, and, thirdly, extend the duopoly model of the platform competition to the triopoly model in order to examine merger outcomes. We find that under full market coverage exclusive dealing reduces producer surplus given small network benefits enjoyed by advertisers. In turn, a merger between two platforms leads to the excessive pricing employed by both merging platforms and their competitor. Moreover, such merger decreases total welfare.