Optimal Price Allocations in Two-Sided Markets

This paper derives an optimal allocation rule (?*) that (i) assigns a share of the transaction price to the buyer-side of the two-sided market; (ii) is equivalent to the Rochet-Tirole price structure rule; and (iii) is a function of the own/cross-price elasticities. For linear demands, demand symmetry is sufficient for ?* = ½ and ?* is decreasing (increasing) in the own-price (cross-price) sensitivity parameter of buyer-side demand.