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Platform OwnershipVolker NockeDepartment of Economics, University of Mannheim Martin PeitzUniversity of Mannheim - Department of Economics Konrad O. StahlUniversity of Mannheim - Department of Economics; Centre for Economic Policy Research (CEPR) July 21, 2004 PIER Working Paper No. 04-029 Abstract: We develop a general theoretical framework of trade on a platform on which buyers and sellers interact. The platform may be owned by a single large, or many small independent or vertically integrated intermediaries. We provide a positive and normative analysis of the impact of platform ownership structure on platform size. The strength of network effects is important in the ranking of ownership structures by induced platform size and welfare. While vertical integration may be welfare-enhancing if network effects are weak, monopoly platform ownership is socially preferred if they are strong. These are also the ownership structures likely to emerge.
Number of Pages in PDF File: 29 Keywords: Two-Sided Markets, Network Effects, Intermediation, Product Div JEL Classification: L10, D40 working papers seriesDate posted: July 26, 2004Suggested CitationContact Information
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