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The economics of platforms

Author

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  • Demary, Vera
  • Rusche, Christian

Abstract

Digital platforms already dominate the top 10 of the world's most valuable firms. The specific characteristics of their business model, such as quick growth and market power soon after market entry, have provoked public discourse. This paper analyzes digital platforms' business models, the reasons for their success and the challenges they present. Digital platforms offer an online forum for conducting transactions and therefore are able to dramatically reduce transaction costs, which creates value for platform users. Generally, digital platforms are aware of the high and increasing importance of data. By collecting and combining data from the different user groups, digital platforms are able to improve their service for existing users and to attract new user groups. Digital platforms' market power and their control over large, valuable sets of data have attracted the attention of regulatory authorities and led to investigations and fines. Economic policy should aim to protect consumers while still fostering the digital platform business model.

Suggested Citation

  • Demary, Vera & Rusche, Christian, 2018. "The economics of platforms," IW-Analysen, Institut der deutschen Wirtschaft (IW) / German Economic Institute, volume 123, number 123.
    • Handle: RePEc:zbw:iwkana:123
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    References listed on IDEAS

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    1. Hildebrandt, Christian & Arnold, René, 2016. "Big Data und OTT-Geschäftsmodelle sowie daraus resultierende Wettbewerbsprobleme und Herausforderungen bei Datenschutz und Verbraucherschutz," WIK Discussion Papers 414, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
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    Cited by:

    1. Klaus-Heiner Röhl & Barbara Engels, 2021. "Mehr Kooperation von Start-ups und Mittelstand als Chance für Digitalisierung und Innovationen [More Cooperation Between Startups and SMEs as an Opportunity for Digital Transformation and Innovatio," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(5), pages 381-386, May.
    2. Christian Rusche & Jan Büchel, 2021. "On Gatekeepers and Structural Competition Problems," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(4), pages 205-210, July.
    3. Thomas Mayer & Julian Grigo & Patrick Hansen & Lars Hornuf & Burkhard Balz & Jan Paulick & Markus Demary & Vera Demary & Stefan Eichler & Marcel Thum & Gilbert Fridgen & Benedict Drasch, 2019. "Parallelwährungen jenseits der Finanzaufsicht: Haben Bitcoin und Libra eine Zukunft?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(17), pages 03-28, September.
    4. Christian Rusche & Marc Scheufen & Steffen J. Roth & Karl-Nikolaus Peifer, 2019. "Die Ökonomie des neuen EU-Urheberrechts: Sieg der Plattformbetreiber oder Chance für Geschäftsmodelle der Kreativbranche?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(13), pages 03-11, July.
    5. Rainer Alt, 2020. "Evolution and perspectives of electronic markets," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 1-13, March.

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