Two-Sided Markets with Negative Externalities

This paper analyses a two-sided market in which two platforms
compete against each other. One side, the advertisers, exerts a
negative externality on the ther 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 advertisers' side is reduced. If platforms can
charge users as well, profits might increase or decrease, the
latter because of increased competition through the additional
instrument of the user fee. Nevertheless the equilibrium with user
fee is more efficient.