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Due to network effects and switching costs in platform markets, entrants generally must offer revolutionary functionality to win substantial market share. We explore a second entry path that does not rely upon Schumpeterian innovation: platform envelopment. Through envelopment, a provider in one platform market can enter another platform market, and combine its own functionality with that of the target in a multi-platform bundle that leverages shared user relationships. Envelopers capture market share by foreclosing an incumbent's access to users; in doing so, they harness the network effects that previously had protected the incumbent. We present a typology of envelopment attacks based on whether platform pairs are complements, weak substitutes, or functionally unrelated and we analyze conditions under which these attack types are likely to succeed.

Many markets involve two groups of agents who interact via \"platforms,\" where one group's benefit from joining a platform depends on the size of the other group that joins the platform. I present three models of such markets: a monopoly platform; a model of competing platforms where agents join a single platform; and a model of \"competitive bottlenecks\" where one group joins all platforms. The determinants of equilibrium prices are (i) the magnitude of the cross-group externalities, (ii) whether fees are levied on a lump-sum or per-transaction basis, and (iii) whether agents join one platform or several platforms.

We provide a road map to the burgeoning literature on two-sided markets and present new results. We identify two-sided markets with markets in which the structure, and not only the level of prices charged by platforms, matters. The failure of the Coase theorem is necessary but not sufficient for two-sidedness. We build a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality, and obtain new results on the mix of membership and usage charges when price setting or bargaining determine payments between end-users.

I study pricing and commitment by platforms in two-sided markets with the following characteristics: (i) platforms are essential bottleneck inputs for buyers and sellers transacting with each other; (ii) sellers arrive before buyers; and (iii) platforms can charge both fixed fees and variable fees (royalties). I show that a monopoly platform may prefer not to commit to the price it will charge buyers at the same time it announces its seller price if it faces unfavorable seller expectations. With competing platforms, commitment makes the existence of an exclusive equilibrium (in which sellers register with only one platform) less likely, but it has no impact on multi-homing equilibria (in which sellers support both platforms) whenever these exist.

Mobility-as-a-Service (MaaS) system is regarded as one of the emerging solutions to offer integrated, seamless, and flexible multi-modal mobility services as an alternative to privately owned mobility resources. MaaS is expected to change the way users will choose their modes of transport to reach their daily activities, and how service providers will generate profits, cooperate, and compete. To successfully deploy MaaS to reach the intended goals, it is critical to develop feasible and sustainable models that capture the diverse needs of customers as well as the diverse and often competing objectives of service providers. This paper aims to provide a general modelling framework and a critical and descriptive analysis of the relevant literature relating all main actors in the MaaS ecosystem, and identify and discuss all factors that are considered relevant, focusing on the actor’s decision-making processes and their correlations. This review shows the large variety and interaction of factors influencing MaaS adoption and their impact on forecasting MaaS appeal. It is also observed that current travel behaviour and multi-modal transport models are not fully capturing the diverse travel needs and choices of potential MaaS users. Recent advancements in agent-based simulation and discrete choice modelling offer potential solutions to address this gap, and future research should aim in that direction. Finally, the review analyses the interaction between MaaS actors, including customers, service providers, the government, and the MaaS Broker, highlighting the complexity of the modelling process comprising all actors of the MaaS ecosystem. Therefore, it is recommended to prioritise future research in exploring these areas.

Platforms such as Airbnb, Amazon, Apple iOS, eBay, Microsoft Windows, and Uber are ubiquitous. The two-sided nature of platform markets, however, requires a reconsideration of the conditions for profit maximization and understanding of how platforms operate. Profit-maximization in two-sided markets is characterized as an intuitive extension of the inverse elasticity pricing rule (Lerner index). This is further expressed in terms of the participants' primitives: users' reservation values and the platform's marginal cost. Differences between one- and two-sided markets are demonstrated and discussed.

For a period starting in 2015, Apple, Google, and Microsoft became the most valuable companies in the world. Each was marked by an external developer ecosystem. Anecdotally, at least, developers matter. Using a formal model of code spillovers, we show how a rising number of developers can invert the firm. That is, firms will choose to innovate using open external contracts in preference to closed vertical integration. The locus of value creation moves from inside the firm to outside. Distinct from physical goods, digital goods afford firms the chance to optimize spillovers. Further, firms that pursue high risk innovations with more developers can be more profitable than firms that pursue low risk innovations with fewer developers. More developers give platform firms more chances at success. Our contribution is to show why developers might cause a shift in organizational form and to provide a theory of how platform firms optimize their own intellectual property regimes in order to maximize growth. We use stylized facts from multiple platform firms to illustrate our theory and results.

Suppose that a firm in charge of a business ecosystem is a firm in charge of a microeconomy. To achieve the highest growth rate, how open should that economy be? To encourage third-party developers, how long should their intellectual property interests last? We develop a sequential innovation model that addresses the trade-offs inherent in these two decisions: (i) Closing the platform increases the sponsor’s ability to charge for access, while opening the platform increases developer ability to build upon it. (ii) The longer third-party developers retain rights to their innovations, the higher the royalties they and the sponsor earn, but the sooner those developers’ rights expire, the sooner their innovations become a public good upon which other developers can build. Our model allows us to characterize the optimal levels of openness and of intellectual property (IP) duration in a platform ecosystem. We use standard Cobb–Douglas production technologies to derive our results. These findings can inform innovation strategy, choice of organizational form, IP noncompete decisions, and regulation policy. This paper was accepted by Chris Forman, information systems.

In the context of software platforms, we examine how cross-side network effects (CNEs) on different platform sides (app-side and user-side) are temporally asymmetric, and how these CNEs are influenced by the platform’s governance policies. Informed by a perspective of value creation and capture, we theorize how the app-side and the user-side react to each other with distinct value creation/capture processes, and how these processes are influenced by the platform’s governance policies on app review and platform updates. We use a time-series analysis to empirically investigate the platform ecosystem of a leading web browser. Our findings suggest that while the growth in platform usage results in long-term growth in both the number and variety of apps, the growth in the number of apps and the variety of apps only leads to short-term growth in platform usage. We also find that long app review time weakens the long-term CNE of the user-side on the app-side, but not the short-term CNE of the app-side on the user-side. Moreover, we find that frequent platform updates weaken the CNEs of both the user-side and the app-side on each other. These findings generate important implications regarding how a software platform may better govern its ecosystem with different participants.

Echenique, Lee, Shum, and Yenmez (2013) established the testable revealed preference restrictions for stable aggregate matching with transferable (TU) and non-transferable utility (NTU) and for extremal stable matchings. In this paper, we rephrase their restrictions in terms of properties on a corresponding bipartite graph. From this, we obtain a simple condition that verifies whether a given aggregate matching is rationalisable. For matchings that are not rationalisable, we provide a simple greedy algorithm that computes the minimum number of matches that needs to be removed to obtain a rationalisable matching. We also show that the related problem of finding the minimum number of types that we need to remove in order to obtain a rationalisable matching is NP-complete.