Winner-Take-All in Networked Markets: Summary
By Pooyan Safari
This article is partitioned into three parts which is summarized here. First, different kinds of platform structures are introduced. Then the most important part, which we will use later in order to analyze the Google study case, is dealt with the influencing factors on the so called structures. In the end there is shown a framework so that to analyze the factors mentioned in the previous section. By definition platforms are subset of components and rules employed by users in most of their transactions. Components include hardware, software, and services while the rules are combinations of technical standard, protocols for information exchange, policies, and contracts that govern transactions. We can conclude this paragraph only by looking at the figure below. Recall here in this article we focus on two-sided networks, since they are the most typical platform-mediated network. Two-sided networks, are economic platforms having two distinct user groups that provide each other with network benefits.
There are three different kinds of platform structure, named Multi-Homing, Mono-Homing, Mixed-Mode Homing, and Winner-Take-All (WTA). Here we focus on WTA platform structure in which one platform serves the mature, say saturated, networked market; roughly speaking, over 90% of the relevant networked market. There are different factors influencing platform structures, numbered as: 1. Whether the market is a “natural monopoly”
2. Multi-homing costs
3. The strength of network effects
4. User’s preferences for differentiated platform functionality Looking at the platform structure, one should consider a combination of these factors; they are not isolated and cannot be analyzed as separate factors. Minimum efficient scale beyond the extent of mature market size defines a “natural monopoly”. Multi-homing is a circumstance in which two-sided markets contain more than one competing platform. The...
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