The economics of markets and platforms

Daniel F. Spulber*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

42 Scopus citations

Abstract

Advances in the study of both markets and platforms contribute to economics. Platforms are typically digital markets, although platforms can designate markets generally. So, the economics of markets and the economics of platforms are one and the same. Platforms show the critical role of intermediaries in endogenous price adjustment and market clearing. The platform model remedies problems with general equilibrium analysis by combining and extending the basic Walrasian and Marshalian market models. The analysis of platforms provides explanations for the bid–ask spread, including market power, search costs, matching costs, adverse selection, and moral hazard. The study of platforms demonstrates the importance of participation and coordination in the formation of markets. The discussion emphasizes that platforms have significant implications for the theory of the firm. The analysis further considers how platforms affect innovation and entrepreneurship.

Original languageEnglish (US)
Pages (from-to)159-172
Number of pages14
JournalJournal of Economics and Management Strategy
Volume28
Issue number1
DOIs
StatePublished - Mar 1 2019

Funding

I gratefully acknowledge research support from Qualcomm, the Ewing Marion Kauffman Foundation, and the Kellogg School of Management.

Keywords

  • bid–ask spread
  • ecosystem
  • entrepreneur
  • innovation
  • intermediaries
  • market
  • market maker
  • market microstructure
  • match maker
  • networks
  • platform
  • sharing economy
  • theory of the firm
  • two-sided markets

ASJC Scopus subject areas

  • General Business, Management and Accounting
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

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