Topic 7 multi sided platforms
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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 223 May 2013. Date. Overview. Maximizing Value. Platform Maximizes Value .

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Topic 7:Multi-Sided platforms

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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 223 May 2013

Date


Overview

Overview


Maximizing value

Maximizing Value


Platform maximizes value

Platform Maximizes Value


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


Multihoming

Multihoming


Multi homing key concept for platforms

Multi-homing key concept for platforms


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


Homing more complicated than it seems

‘Homing more complicated than it seems


Competition for single homing customers

Competition for single homing customers


Switching costs and multi homing strategies

Switching costs and multi-homing Strategies


Single homing and pricing in practice

Single homing and pricing in practice


Pricing strategies

Pricing Strategies


Profit level versus pricing structure

Profit level versus pricing structure


Rules of thumb for pricing s tructure

Rules of thumb for pricing structure


Software p latforms and pricing

Software platforms and pricing


Ignition and critical mass

Ignition and Critical Mass


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


Most platform compete with other platforms

Most platform compete with other platforms


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


Overview1

Overview


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