Toward a Market Epistemology of the Platform Economy
Advances in Austrian Economics, Forthcoming
31 Pages Posted: 23 Aug 2018
Date Written: July 11, 2018
The platform economy reflects the business model of some of the largest and fastest-growing firms in the economy. Platform business models emerge and thrive because of the potential profit in taking advantage of transactions cost reductions to connect people for mutual benefit, and this value creation is best understood by thinking about the epistemology of decentralized market processes.
Three essential aspects of knowledge are relevant to platform business models:
(1) knowledge can be private and diffuse;
(2) knowledge can be contextual;
(3) knowledge may not exist outside of the economic process.
After defining and analyzing the technology, economic, and institutional aspects of platforms I define and apply market epistemology to explore how platforms harness technological and organizational features to create value-enhancing market platforms by exploiting the epistemic benefits of technology-enabled decentralized market processes. I conclude by using this epistemic framework to propose an electricity distribution platform business model – the retail electricity industry is undergoing a process of technological dynamism, and as a regulated infrastructure industry, evolving into a decentralized market industry is presenting challenges to which this epistemic framework can bring increased understanding.
Keywords: markets, epistemology, platforms, networks, technological change, transaction cost economics, electricity, regulation
JEL Classification: L22, L86, L94, D23, B53, O33
Suggested Citation: Suggested Citation