Design and Ownership of Two-Sided Networks: Implications for Internet Platforms.

Author List: Bakos, Yannis; Katsamakas, Evangelos;
Journal of Management Information Systems, 2008, Volume 25, Issue 2, Page 171-202.
Many Internet intermediaries operate two-sided networks, that is, they provide platforms to bring together two types of participants, or "sides," such as buyers and sellers. This paper develops a model that characterizes the intermediary's pricing in two-sided networks, the value created by these networks, and the allocation of that value across the two sides. It extends the two-sided networks literature by endogenizing the level of network effects as the result of relevant investments by the intermediary, which determine the design of the network. It shows that under certain assumptions about the available technologies, the design of the two-sided network is highly asymmetric independent of its ownership structure. The paper provides insight into design strategies for Internet platforms, and it discusses their welfare implications.
Keywords: intermediation; Internet platforms; network effects; two-sided markets; Two-sided networks
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List of Topics

#62 0.221 price buyers sellers pricing market prices seller offer goods profits buyer two-sided preferences purchase intermediary traditional marketplace decisions intermediaries selling
#249 0.188 network networks social analysis ties structure p2p exchange externalities individual impact peer-to-peer structural growth centrality participants sharing economic ownership embeddedness
#102 0.155 choice type functions nature paper literature particular implications function examine specific choices extent theoretical design discussion value widely finally adopted
#98 0.114 platform platforms dynamics ecosystem greater generation open ecosystems evolution two-sided technologies investigate generations migration services implications interplay disruptive control markets
#228 0.088 internet peer used access web influence traditional fraud world ecology services impact cases wide home studies addition choice 2008 telephone
#270 0.077 design designs science principles research designers supporting forms provide designing improving address case little space criteria methods increasing synthesis designer