Market Orchestrators: The Effects of Platform Certification on Complementor Behavior
48 Pages Posted: 28 Feb 2018 Last revised: 2 Jul 2019
Date Written: July 1, 2019
Multisided platforms serve two or more sets of users who are connected via an indirect network effect. Beyond pricing, the extent and scope of the interactions between the platform’s users depend on various other factors including product quality, exclusivity and users’ heterogeneous preferences. Platforms thus have to carefully balance the needs of their users through the enactment of governance strategies. Selective promotion of a subset of the platform’s users through certification is often part of this “market orchestration” process. We study how a platform’s certification of supply-side users (or, complementors) affects the bundle of products offered by those users, as well as how it affects the platform’s demand-side users. We use a unique dataset of Kiva’s microfinance platform to take advantage of a quasi-exogenous shock: Kiva’s unexpected introduction of the Social Performance badging program in December, 2011. We show that Kiva’s certification leads badged microfinance institutions to reorient their loan portfolio composition to align with the dimension of the certification, and that the extent of portfolio reorientation varies across microfinance institutions. We further show that microfinance institutions who do align their loan portfolios with the certification enjoy stronger demand-side benefits than certified microfinance institutions who do not align their loan portfolios.
Keywords: multisided platforms, platform governance, complementors, certification, sharing economy
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