Multi-Sided Platforms: From Microfoundations to Design and Expansion Strategies

26 Pages Posted: 9 Jan 2007

See all articles by Andrei Hagiu

Andrei Hagiu

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: April 3, 2009

Abstract

Multi-sided platforms (MSPs), which bring together two or more interdependent groups of customers, have recently risen to economic and business prominence in many industries. This paper first lays out a simple micro-founded framework which aims to organize academic and managerial thinking about MSPs. It argues that any MSP performs one or both among two fundamental functions: reducing search costs and reducing shared transaction costs among its multiple sides. Using a variety of illustrations, the framework is then used to formulate general principles driving MSP design and expansion strategies: choosing the relevant platform "sides", deciding which fundamental activities to perform and trading off depth against scope of MSP functions.

Keywords: Monopolistic competition, Product Variety

JEL Classification: L1, L2, L8

Suggested Citation

Hagiu, Andrei, Multi-Sided Platforms: From Microfoundations to Design and Expansion Strategies (April 3, 2009). Harvard Business School Strategy Unit Working Paper No. 09-115 . Available at SSRN: https://ssrn.com/abstract=955584 or http://dx.doi.org/10.2139/ssrn.955584

Andrei Hagiu (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-313
Cambridge, MA 02142
United States
617-715-4844 (Phone)

HOME PAGE: http://andreihagiu.com/

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