The economics of markets and platforms

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 intermediari...

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Bibliographic Details
Published in:Journal of economics & management strategy 2019, Vol.28 (1), p.159-172
Main Author: Spulber, Daniel F.
Format: Article
Language:English
Subjects:
bid–ask spread
Coordination
Economic models
ecosystem
Endogenous
entrepreneur
Entrepreneurship
innovation
Innovations
intermediaries
market
market maker
market microstructure
Markets
match maker
Moral hazard
networks
platform
Power
sharing economy
theory of the firm
two‐sided markets
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Summary: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.
ISSN:1058-6407
1530-9134
DOI:10.1111/jems.12290