References (43)


Citations (7)



Failure to Launch: Critical Mass in Platform Businesses

David S. Evans

University of Chicago Law School; University College London; Global Economics Group

Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

September 2, 2010

Platform businesses add value by facilitating interactions between customers who are attracted at least in part by network externalities. Platform businesses with low switching costs have become more important with the rise of the internet. This essay explores the sources of the initial critical mass constraint that new, potentially viable businesses of this sort generally seem to face. For two-sided platforms, we show that this constraint is two-dimensional and depends on the nature of network effects and the distribution of customer tastes. Depending on the dynamics of adjustment to equilibrium, it may pose a chicken-and-egg problem.

Number of Pages in PDF File: 33

Keywords: Platform businesses, two-sided platforms, critical mass

JEL Classification: L1, O3

working papers series

Download This Paper

Date posted: April 10, 2009 ; Last revised: September 5, 2010

Suggested Citation

Evans, David S. and Schmalensee, Richard, Failure to Launch: Critical Mass in Platform Businesses (September 2, 2010). Available at SSRN: http://ssrn.com/abstract=1353502 or http://dx.doi.org/10.2139/ssrn.1353502

Contact Information

David S. Evans (Contact Author)
University of Chicago Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
University College London ( email )
London WC1E OEG
United Kingdom
Global Economics Group ( email )
1400 S. Dearborn, Suite 400
Chicago, IL 60603
United States
Richard Schmalensee
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
Room E52-410
Cambridge, MA 02142
United States
617-253-2957 (Phone)
617-258-6617 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN

Paper statistics
Abstract Views: 1,937
Downloads: 684
Download Rank: 18,858
References:  43
Citations:  7

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.297 seconds