Comments on Evans & Schmalensee´s The Industrial Organization of Markets with Two-Sided Platforms

Janusz Ordover, Apr 19, 2007

A freshman student in economics or a Nobel prize-winning macroeconomist who has lately stumbled across a journal or two in industrial organization economics may be somewhat perplexed or confused by many references to two-sided markets. Surely, is it not the case that all markets have two sides, namely buyers and sellers? Consequently, to the uninitiated, the concept of a two-sided market offers little, if any, additional analytical insight. Some of that confusion is perhaps dispelled by a more informative description, namely: markets with two-sided platforms. So for the rest of this paper, we shall forget about two-sided markets and speak of two-sided platforms (2SP) and of markets in which these 2SPs compete. Professors David Evans and Richard Schmalensee (hereinafter E&S), who have done more than most of the thinking about the economics of 2SPs and advocating the importance of the idea to other academics, lawyers, policymakers, and business people, offer a highly accessible survey of the state of play in their excellent contribution to this volume. It is important to recognize that, perhaps without knowing so, economists have studied 2SPs for quite some time (i.e., way before the term was invented) as have competition authorities and the courts. And, of course, business people, who generally are ahead of theoreticians in such matters, have also intuitively understood the specific pricing and marketing challenges that have to be solved in or…

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