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A search-matching model of the buyer-seller platforms


  • Chen, Kong-Pin
  • Yen-Chi, Huang


Based on the frictional matching framework, the paper provides a theoretical model for a specic type of two-sided platform: The buyer- seller transaction platform. In the model, the number of participants and the source of network externalities are endogenously determined. The platform is shown to exhibit both positive cross-group and neg- ative within-group network externalities. The optimal pricing of the platform depends not only on the cost of providing service and the benets of the participants, but also on how the marginal entrant (ei- ther a buyer or a seller) aects the matching probability. Since the sellers can shift the burden of entry fee to the buyers, the platform never subsidizes the sellers.

Suggested Citation

  • Chen, Kong-Pin & Yen-Chi, Huang, 2009. "A search-matching model of the buyer-seller platforms," MPRA Paper 38372, University Library of Munich, Germany, revised 14 Dec 2011.
  • Handle: RePEc:pra:mprapa:38372

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    References listed on IDEAS

    1. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
    2. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
    3. 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.
    4. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    5. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    6. 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.
    7. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
    8. Glenn Ellison & Drew Fudenberg & Markus Möbius, 2004. "Competing Auctions," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 30-66, March.
    9. repec:hrv:faseco:4589709 is not listed on IDEAS
    10. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 483-512.
    11. Rochet, Jean Charles & Tirole, Jean, 2008. "Tying in two-sided markets and the honor all cards rule," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1333-1347, November.
    12. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    13. 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.
    14. Jullien, Bruno, 2008. "Price Skewness and Competition in Multi-Sided Markets," IDEI Working Papers 504, Institut d'Économie Industrielle (IDEI), Toulouse.
    15. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
    16. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
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    More about this item


    two-sided platform; fees; network externalities; subsudy;

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact


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