Two sided markets Flashcards
Basic idea
you must attract one side in order to attract the other side
Two sided platform coordination problem
which side comes first
profit maximising platform can break the coordination problem - subsidize one side
on side represents an input cost for the other side
Ways to address the coordination problem
Reduce transaction costs
designing the price structure in a way that incentivizes joining
Partially integrate with one side of the market and fully disintegrate at a later point
example amazon bookstore - amazon was a seller, before they became just a platform
a service is a two sided platform if
there are two distinct groups of customers that need each other (externality)
groups cannot get together easily
setting prices to get both sides onboard
no control on final price set by one side
Features of two sided platforms
network effects
pricing
Discuss network effects in two sided platforms
adoption externalities
cross group effects
intragroup network effects
Discuss pricing in two sided platforms
Asymmetric pricing
Costs of control
services
productgs
benefits of control
scale effects
aggregation (complementarities)
buyer/seller experience
solving market failers