Two‐ S ided Markets

Abstract

Abstract Whenever agents to a transaction (for example, consumers and suppliers) interact through intermediaries or a ‘platform’ that is controlled by a third party, the agents are using a two‐sided platform. Two‐sided platforms are common. However, if a two‐sided platform involves network effects, so that participants on one side of the platform care about the number of participants on the other side of the platform, it is a two‐sided market. These markets raise a variety of important issues for economists and policy‐makers. In this article, I briefly explain the nature of two‐sided markets and, using simple examples, show how they can behave very differently to standard one‐sided markets.

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