Design and Ownership of Two-Sided Networks: Implications for Internet Platforms

Journal of Management Information Systems, 25(2), 171-202, 2008

41 Pages Posted: 7 Mar 2019

See all articles by Yannis Bakos

Yannis Bakos

New York University (NYU) - Department of Information, Operations, and Management Sciences

Evangelos Katsamakas

Graduate School of Business, Fordham University

Date Written: Fall 2008

Abstract

Many Internet intermediaries operate two-sided networks, that is, they provide platforms to bring together two types of participants, or "sides," such as buyers and sellers. This paper develops a model that characterizes the intermediary’s pricing in two-sided networks, the value created by these networks, and the allocation of that value across the two sides. It extends the two-sided net-works literature by endogenizing the level of network effects as the result of re-levant investments by the intermediary, which determine the design of the net-work. It shows that under certain assumptions about the available technologies, the design of the two-sided network is highly asymmetric independent of its ownership structure. The paper provides insight into design strategies for Internet platforms, and it discusses their welfare implications.

Keywords: platforms, platform design, platform investment, platform technologies, two-sided networks, two-sided markets, network effects, networks, ownership, investment, endogenous network effects, intermediation, B2B electronic marketplaces

JEL Classification: L12, L13, D42, D43

Suggested Citation

Bakos, Yannis and Katsamakas, Evangelos, Design and Ownership of Two-Sided Networks: Implications for Internet Platforms (Fall 2008). Journal of Management Information Systems, 25(2), 171-202, 2008. Available at SSRN: https://ssrn.com/abstract=1321556

Yannis Bakos

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States
212-998-0841 (Phone)

HOME PAGE: http://www.stern.nyu.edu/~bakos

Evangelos Katsamakas (Contact Author)

Graduate School of Business, Fordham University ( email )

United States

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