IDEAS home Printed from https://ideas.repec.org/p/mnh/wpaper/41306.html
   My bibliography  Save this paper

Platforms and network effects

Author

Listed:
  • Belleflamme, Paul
  • Peitz, Martin

Abstract

In many markets, user benefits depend on participation and usage decisions of other users giving rise to network effects. Intermediaries manage these network effects and thus act as platforms that bring users together. This paper reviews key findings from the literature on network effects and two-sided platforms. It lays out the basic models of monopoly platforms and platform competition, and elaborates on some routes taken by recent research.

Suggested Citation

  • Belleflamme, Paul & Peitz, Martin, 2016. "Platforms and network effects," Working Papers 16-14, University of Mannheim, Department of Economics.
    • Handle: RePEc:mnh:wpaper:41306
    as

    Download full text from publisher

    File URL: https://madoc.bib.uni-mannheim.de/41306/1/16-14_Belleflamme%20Peitz.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul Belleflamme & Eric Toulemonde, 2009. "Negative Intra-Group Externalities In Two-Sided Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 245-272, February.
    2. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
    3. Belleflamme, Paul & Omrani, Nessrine & Peitz, Martin, 2015. "The economics of crowdfunding platforms," Information Economics and Policy, Elsevier, vol. 33(C), pages 11-28.
    4. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle & Peitz, Martin, 2012. "Media market concentration, advertising levels, and ad prices," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 321-325.
    5. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    6. Anderson, Simon P. & Peitz, Martin, 2015. "Media see-saws : winners and losers on media platforms," Working Papers 15-16, University of Mannheim, Department of Economics.
    7. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1249-1278.
    8. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    9. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, April.
    10. Volker Nocke & Martin Peitz & Konrad Stahl, 2007. "Platform Ownership," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1130-1160, December.
    11. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
    12. Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001. "Price competition when consumer behavior is characterized by conformity or vanity," Journal of Public Economics, Elsevier, vol. 80(3), pages 385-408, June.
    13. Glenn Ellison & Drew Fudenberg & Markus Möbius, 2004. "Competing Auctions," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 30-66, March.
    14. Shane Greenstein & Martin Peitz & Tommaso Valletti, 2016. "Net Neutrality: A Fast Lane to Understanding the Trade-Offs," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 127-150, Spring.
    15. Luís Cabral, 2011. "Dynamic Price Competition with Network Effects," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 83-111.
    16. Belleflamme, Paul & Peitz, Martin, 2010. "Platform competition and seller investment incentives," European Economic Review, Elsevier, vol. 54(8), pages 1059-1076, November.
    17. Paul Belleflamme & Eric Toulemonde, 2016. "Tax Incidence on Competing Two-Sided Platforms: Lucky Break or Double Jeopardy," CESifo Working Paper Series 5882, CESifo.
    18. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    19. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    20. Benjamin Edelman & Julian Wright, 2015. "Price Coherence and Excessive Intermediation," The Quarterly Journal of Economics, Oxford University Press, vol. 130(3), pages 1283-1328.
    21. Simon P. Anderson & Øystein Foros & Hans Jarle Kind, 2018. "Competition for Advertisers and for Viewers in Media Markets," Economic Journal, Royal Economic Society, vol. 128(608), pages 34-54, February.
    22. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-564, May.
    23. Jacques Crémer & Patrick Rey & Jean Tirole, 2000. "Connectivity in the Commercial Internet," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 433-472, December.
    24. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    25. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
    26. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring.
    27. Crawford, Gregory S., 2015. "The Economics of Television and Online Video Markets," CEPR Discussion Papers 10676, C.E.P.R. Discussion Papers.
    28. Andrei Hagiu, 2009. "Two‐Sided Platforms: Product Variety and Pricing Structures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1011-1043, December.
    29. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    30. Reisinger, Markus, 2014. "Two-part tariff competition between two-sided platforms," European Economic Review, Elsevier, vol. 68(C), pages 168-180.
    31. Gregory S. Crawford, 2015. "The economics of television and online video markets," ECON - Working Papers 197, Department of Economics - University of Zurich.
    32. Steffen Hoernig & Roman Inderst & Tommaso Valletti, 2014. "Calling circles: network competition with nonuniform calling patterns," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 155-175, March.
    33. Cremer, Jacques & Rey, Patrick & Tirole, Jean, 2000. "Connectivity in the Commercial Internet," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 433-472, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bott, Johanna & Arnold, René & Hildebrandt, Christian, 2018. "Die Nutzung von Daten durch OTT-Dienste zur Abschöpfung von Aufmerksamkeit und Zahlungsbereitschaft: Implikationen für Daten- und Verbraucherschutz," WIK Discussion Papers 431, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    2. Krämer, Jan & Peitz, Martin, 2018. "A fresh look at zero-rating," Telecommunications Policy, Elsevier, vol. 42(7), pages 501-513.
    3. Oriol, Nathalie & Rufini, Alexandra & Torre, Dominique, 2018. "Fifty-shades of grey: Competition between dark and lit pools in stock exchanges," Information Economics and Policy, Elsevier, vol. 45(C), pages 68-85.
    4. Bertani, Filippo & Ponta, Linda & Raberto, Marco & Teglio, Andrea & Cincotti, Silvano, 2021. "The complexity of the intangible digital economy: an agent-based model," Journal of Business Research, Elsevier, vol. 129(C), pages 527-540.
    5. Wu, Wenqing & Huang, Xuan & Wu, Chia-Huei & Tsai, Sang-Bing, 2022. "Pricing strategy and performance investment decisions in competitive crowdfunding markets," Journal of Business Research, Elsevier, vol. 140(C), pages 491-497.
    6. Hildebrandt, Christian & Arnold, René, 2018. "Marktbeobachtung in der digitalen Wirtschaft – Ein Modell zur Analyse von Online-Plattformen," WIK Discussion Papers 427, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    7. Kroon, Peter & Arnold, René, 2018. "Die Bedeutung von Interoperabilität in der digitalen Welt – Neue Herausforderungen in der interpersonellen Kommunikation," WIK Discussion Papers 437, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    8. Stephen Jarman & Deniz D. Karaman Örsal, 2020. "The regulation of zero-price markets by the competition authorities in the USA and the EU," Competition and Regulation in Network Industries, , vol. 21(4), pages 315-343, December.
    9. Arnold, René & Schneider, Anna & Lennartz, Jonathan, 2020. "Interoperability of interpersonal communications services – A consumer perspective," Telecommunications Policy, Elsevier, vol. 44(3).
    10. Iñigo Herguera, 2021. "Competencia y regulación de (algunas) plataformas digitales en la UE," Working Papers 2021-10, FEDEA.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    2. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," CEPR Discussion Papers 16480, C.E.P.R. Discussion Papers.
    3. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2022. "Two-sided Markets, Pricing, and Network Effects," Working Papers hal-03629451, HAL.
    4. Belleflamme, Paul & Toulemonde, Eric, 2016. "Who benefits from increased competition among sellers on B2C platforms?," Research in Economics, Elsevier, vol. 70(4), pages 741-751.
    5. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, April.
    6. Paul Belleflamme & Martin Peitz, 2019. "Managing competition on a two‐sided platform," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 5-22, January.
    7. Reisinger, Markus, 2014. "Two-part tariff competition between two-sided platforms," European Economic Review, Elsevier, vol. 68(C), pages 168-180.
    8. Charles Angelucci & Julia Cagé, 2019. "Newspapers in Times of Low Advertising Revenues," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 319-364, August.
    9. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    10. Jullien, Bruno, 2010. "Two-Sided B2B Platforms," TSE Working Papers 11-223, Toulouse School of Economics (TSE), revised Mar 2011.
    11. Wang, Jin, 2021. "Do birds of a feather flock together? Platform’s quality screening and end-users’ choices theory and empirical study of online trading platforms," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    12. Reisinger, Markus, 2010. "Unique Equilibrium in Two-Part Tariff Competition between Two-Sided Platforms," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 308, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Doh-Shin Jeon & Nikrooz Nasr, 2016. "News Aggregators and Competition among Newspapers on the Internet," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 91-114, November.
    14. Peitz, Martin & Valletti, Tommaso, 2015. "Reassessing competition concerns in electronic communications markets," Telecommunications Policy, Elsevier, vol. 39(10), pages 896-912.
    15. Jeon, Doh-Shin & Jullien, Bruno & Klimenko, Mikhail, 2021. "Language, internet and platform competition," Journal of International Economics, Elsevier, vol. 131(C).
    16. Drew Fudenberg, 2015. "Tirole's Industrial Regulation and Organization Legacy in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(3), pages 771-800, July.
    17. Aoyagi, Masaki, 2018. "Bertrand competition under network externalities," Journal of Economic Theory, Elsevier, vol. 178(C), pages 517-550.
    18. Calvano, Emilio & Polo, Michele, 2021. "Market power, competition and innovation in digital markets: A survey," Information Economics and Policy, Elsevier, vol. 54(C).
    19. Joao Correia‐da‐Silva & Bruno Jullien & Yassine Lefouili & Joana Pinho, 2019. "Horizontal mergers between multisided platforms: Insights from Cournot competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 109-124, January.
    20. Kong-Pin Chen & Yen-Chi Huang, 2012. "A Search-Matching Model of the Buyer--Seller Platforms," CESifo Economic Studies, CESifo, vol. 58(4), pages 626-649, December.

    More about this item

    Keywords

    Network effects ; digital platforms ; two-sided markets ; tipping ; platform competition ; intermediation ; pricing ; imperfect competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mnh:wpaper:41306. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/fvmande.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Katharina Rautenberg (email available below). General contact details of provider: https://edirc.repec.org/data/fvmande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.