Either if you are an experienced researcher or a newcomer who is interested in multi-sided platforms, this section is for you.
In the last two decades, there has been an increasing interest surrounding multi-sided platforms. This web does not pretend to address all the contributions in this area but to highlight the building blocks of this literature that are essential to understand where we are today.
Disclaimer: I am aware of the theoretical and personal biases of the papers I have chosen. This selection only represents my personal opinion.
This book introduces the main concepts with great examples, which helps to understand the mechanisms behind platforms. As an introduction, it provides the basics that allow you to familiarize yourself with some concepts. Needless to say, the two first chapters are enough to have "the flavor".
This work is fundamental to understand why we should care about multi-sided platforms. In a nutshell, this work addresses what is new and states the Eight Fallacies about multi-sided markets, which are key to understand the interest in the field. Note that, as literature grows, new fallacies appear.
This work is considered the first in sparking the mainstream discussion on multi-sided platforms (although there were other early papers with the basic ingredients, this one was the first one in reaching a global arena). It is an essential paper to understand how platforms work, their fundamental features, and how they differ from previous business models.
This work proposed the model that has probably become the most influential one. A simple monopoly à la Hotelling that has proven to be key in posterior works. This work is simple, direct, and powerful. The basic model can be taught in undergraduate courses as well as be part of high-quality research papers.
This work is built upon the two previous ones. It is a great recap on the first steps of the literature and a must-read work to understand the differences between the previous approaches. This work is also among the first ones in trying to establish a closed definition of what a platform is, but even goes beyond and extends the model in different directions proving how prolific this literature could be.
Both are pioneering works that established the main building blocks of the following two decades of literature. Apart from that, these works also emphasize some features that are essential to understand multi-sided markets. To give you a taste: First, monopolies can set prices below marginal cost, and it is profit-maximizing without being a predatory practice! Second, the difference between paying for "entering" the platform (membership) and for "using" the platform (transaction). Third, they showed a key problem that will attract researchers in the next decade, the chicken&egg problem (e.g. how to attract different sides, and which equilibria will prevail).
To me, this is a cornerstone in the literature. Elegantly, Weyl shows how the chicken&egg problem can be addressed in a simple and intuitive way. He proposes the so-called "Insulating Tariffs", which isolates consumers from network effects. A fundamental work to understand how we can deal with the multiple equilibria issue in multi-sided markets.
Among Weyl's contributions there was the re-interpretation of the Spence distortion in multi-sided markets and its role in prices. One decade later, Tan and Wright show us there are two more pricing distortions in multi-sided markets. Specifically, there are four distortions at play: market power, Spence's, displacement, and scale distortions. Their contribution is key not only because they point out such distortions but also because they show that some distortions compensate each other, which puzzles the analysis of platforms even more.
If you are an Economist, you will be familiar with Fudenberg and Tirole's taxonomy of strategic interactions. What if I told you that on multi-sided platforms such taxonomy is different (sometimes)? Fahri and Hagiu precisely prove this.
I like to point out this work for two reasons. First, to the best of my knowledge, it is the first one in showing that platforms internalize network effects imperfectly by focusing on the marginal consumer. Second, because they set the building blocks of how taxes work on multi-sided platforms
A key feature of many multi-sided markets is that consumers can use several platforms at the same time (Multihoming). For example, you may have HBO and Netflix accounts. They continue Armstrong's work on multihoming and show that prices move in opposite directions on sides with and without multihoming. Basically, if you work with multihoming, this work is a must.
Should platforms inform their users about the prices that developers pay? This work is part of a key branch of the literature that addresses price disclosure. Several works have tested whether Hagiu and Halaburda's results are robust, and so far, they really are (See Belleflamme and Peitz, 2019b: Price disclosure by two-sided platforms. International Journal of Industrial Organization).
This work emphasizes a key feature of platforms: Property rights. Between a platform and a merchant, there is a subtle difference in who has the rights over the transferred good. This work was pioneering in this aspect, and property rights are essential when defining a platform. Thus, a mandatory reading.
Built upon the previous work, this one provides a novel definition of multi-sided platforms that emphasizes property rights. This work also departs from other approaches by looking at the incentives of employees to work as freelancers or regular employees. Thus, it points out that the control rights and ownership structure have multiple implications. Extra: Also check Hagiu and Wright (2019): The status of workers and platforms in the sharing economy, Journal of Economics & Management. This time, they focus on the same issue but from a regulator's point of view
Caillaud and Jullien pointed out that different pricing schemes were possible (membership and transaction fees). Fillistrucchi shows how those pricing schemes can be relevant when using the SSNIP test in multi-sided markets. It is also true that there is an open debate on whether Filistrucchi's distinction should be used or not (See Niels, 2019: Transaction versus non-transaction platforms: A false dichotomy in two-sided market definition, Journal of Competition Law & Economics). In any case, his work is a must.
Have you thought about how influencers may shape the competition among platforms? What is the impact on competition of having the best TV shows on your platform? Well, if you want to know, this is your work.
During the last two decades, there has been an extensive development in competition policy regarding platforms. This work is an updated review that you should read if you want to know more about the advances in how competition authorities deal with platforms and where the areas of concern are.
Currently, there is a debate on whether or not competition authorities should approach platforms by considering that network effects are out-of-market efficiencies. These two works present different views on that discussion. Thus, a must-read for anyone interested in how competition authorities should deal with platforms.
Platforms are not just intermediaries, they also influence their ecosystem by fostering/limiting the innovations that arise on the platform. This work formalizes that idea by focusing on the openness decision of a platform. A fundamental work that relates intellectual property and platforms.
A beautiful application of aggregate games to platforms. The work derives strong conclusions about cases in which platforms compete with other sellers on the platform. It is a refreshing theoretical contribution that addresses a hot topic.
Platform markets often have multiple equilibria. Which is the "right" one? Other authors have proposed using insulating tariffs, focality, monotonicity, etc. This paper proposes using potential games as a selection criterion. The results are attractive and provide more compelling results than other criteria, such as focality.
Finally, a shameful self-promotion. This is a literature review on the theoretical developments of the last two decades. If this is your first time immersing yourself in literature, this is a good place to start and understand where we are and where we came from.