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A ntitrust Economics 2013. David S. Evans University of Chicago, Global Economics Group. Elisa Mariscal CIDE, ITAM, CPI. Topic 7: Multi-Sided platforms. Topic 7 | Part 2 23 May 2013. Date. Overview. Maximizing Value. Platform Maximizes Value .

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Topic 7 multi sided platforms

Antitrust Economics 2013

David S. Evans

University of Chicago, Global Economics Group

Elisa Mariscal

CIDE, ITAM, CPI

Topic 7: Multi-Sided platforms

Topic 7 | Part 2 23 May 2013

Date





How p latforms i nternalize n etwork e ffects
How platforms internalize network effects


Platforms harness e xternalities
Platforms harness externalities


Platform design and rules p romote p ositive e xternalities
Platform design and rules promote positive externalities


Governance mitigates n egative e xternalities
Governance mitigates negative externalities


Welfare effects of rules
Welfare effects of rules




Tentative examples of multi homing
Tentative examples of multi-homing

Payment Cards:

People use several and merchants accept many

Software Platforms:

People use one per device and developers write for several

Advertising Supported Media:

Advertisers rely on several and people read several






Pricing strategies
Pricing Strategies



Rules of thumb for pricing s tructure
Rules of thumb for pricing structure


Software p latforms and pricing
Software platforms and pricing



Youtube ignited in late 2005
YouTube ignited in late 2005


Platforms need c ritical m ass to ignite
Platforms need critical mass to ignite


Successful launch r equires c ritical m ass
Successful launch requires critical mass

Critical mass corresponds to a combination of scale and balance that is minimally sufficient to ignite the platform


Critical mass platform i gnition and g rowth
Critical mass, platform ignition and growth

In this example the critical mass points are between C’ and C”.

C* is the point that would lead to optimal platform launch.

Points to the NW of the vector 0-C’ and to the SW of vector 0-C” would result result in platform implosion.

Side A


Three phases of platform g rowth
Three phases of platform growth

Some platforms can secure precommitments from both sides and

thereby collapse initiation and ignition into immediate growth at

startup.


Initiation and getting to critical m ass
Initiation and getting to critical mass


Platform competition
Platform Competition



The myspace monopoly
The MySpace “Monopoly

Facebook

Friendster

MySpace

2011 Social Network Analysis Report, http://www.ignitesocialmedia.com

“We see MySpace as the new MTV, with one crucial difference: the users are the stars.”

“MySpace is far and away the de facto standard for social networking and is highly entrenched in the youth culture of today.”

IMEDIACONNECTION, 2006

MASHABLE, 2006

The long-lived Windows dominance on PCs is (was?) the exception to the rule that platform markets usually aren’t winner take all.


Determinations of competition
Determinations of competition

In practice most multi-sided industries have several competing differentiated MSPs, Scale and indirect network effects don’t result in market tipping to monopoly usually.


Determinants of industry s tructure
Determinants of industry structure


Symmetric vs asymmetric c ompetition
Symmetric vs. asymmetric competition


Examples of asymmetric c ompetition
Examples of asymmetric competition



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