Better than HBR on Two-sided Markets

Jean Tirole and Jean-Charles Rochet wrote,

The starting point for the theory of two-sided markets by contrast is that an end-user does not
internalize the welfare impact of his use of the platform on other end-users.

If Anita’s attendance at the singles bar would attract more men, then Bonnie, Christine, and Debbie should subsidize Anita’s attendance. (Similarly, Anita should want to subsidize the others.) But the transaction costs of doing this are high compared to having the singles bar do the subsidizing. On the other hand, at a brothel, the same externalities do not apply.