Classroom Companion: Business

Definition 10.1 Multisided Platform
A multisided platform (MSP) enables direct interactions between two or more dis-
tinct user groups in which all user groups are affiliated with the MSP (Hagiu & 
Wright, 
2015
).
The MSP is one of the most profitable innovations of the digital economy. Some 
of the largest companies in the digital economy base their business models on an 
MSP, including Google, Facebook, and eBay. Some MSPs have even become mar-
ket leaders in their industry since there is tremendous value in connecting different 
user groups. Still, there seems to be a considerable potential for new MSPs in sev-
eral business and industry sectors, as well as in the public domain.
A comprehensive overview of the literature on the economics of multisided 
platforms is presented by Sanchez-Carlas and Leon (Sanchez-Cartas & Leon, 
2018
). The overview shows that the general approach to dynamic behavior of plat-
forms is based on standard supply and demand theory and agent-based behavior 
theory. These methods provide insight into important areas such as pricing and 
price dependence between the different markets supported by the platform, the 
origin of network effects, coupling between platform services, behavior of users, 
competition between platforms offering equivalent services, problems associated 
with regulations, and formation of de facto monopolies.
In this chapter, the focus is on the temporal evolution of multisided platforms 
triggered by strong network effects and not on pricing and competition in equilib-
rium markets. Several of these markets are usually not in equilibrium because they 
 
Chapter 10 · Multisided Platforms

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have not reached saturation where growth has stagnated (e.g., most social media 
platforms). Moreover, some of the platforms (e.g., Facebook) have become de 
facto monopolies. In these cases, standard supply/demand theories do not apply.