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In the case of two-sided markets, the corresponding definition is more complex than in one-sided markets. In order to analyse the relevant market definition, it is important to take into account that the customer base in one market determines the success in the other market. For example, the number of sellers on an online auction platform has a positive impact on the utility of the buyers and vice versa.
Such interaction is known as indirect network effect, which arises as more consumers join one or the other side of the market.
In cases where the indirect network effect is not very significant, a one-sided market definition might be appropriate. However, if the indirect network effects are substantial, the implementation of the hypothetical monopoly test to only one side of the market could lead to a fallacy in the assessment of the platform’s constraints.
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