Value Appropriation in Two-Sided Markets
25 important questions on Value Appropriation in Two-Sided Markets
Why does the platform provider set prices for that side below the level it would charge if it viewed the subsidy side as an independent market?
What are the different types of two-sided markets?
- Type of product
- Ownership
- Supply side exclusivity
What is meant with supply side exclusivity?
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What is demand side exclusivity?
How is a one-sided market?
How is a two-sided market?
What are two-sided markets in simple terms?
What does a platform owner do?
What benefits to end users?
Why are two-sided markets relevant?
- Sheer size (two-sided business models account for a majority of the revenues of 60 of the world's 100 largest companies)
- Successful strategies differ because of network effects
Which two types of network effects do platforms provide?
- Same-side effect
- Cross-side effect
What is cross-side effect?
What are the three strategies to create more value?
- Create technological gap by objective quality (tech. features)
- Build an installed base (direct network effects) & increase availability of complementary goods (indirect network effects)
- Shape perceptions and expectations through signaling
How to compete in two-sided markets?
- Get the pricing right
- Cope with winner-take-all competition
- Avoid envelopement
Cope with winner-take-all competition
- Decide whether the two-sided market of interest will eventually be served by a single platform
- Decide whether to share the single platform (gain momentum) or fight for proprietary control
- Overcome "chicken-and-egg problem"
What is the lifetime value of a free "customer"?
Which factors should the platform provider consider by pricing the platform?
- Ability to capture cross-side network effects
- User sensitivity to price
- User sensitivity to quality
- Output costs
- Same-side network effects
- Users’ brand value.
Why ability to capture cross-side network affect?
Why user sensitivity to price?
User sensitivity to quality
Same-side network effects
Users' brand value
When do platforms gain edge?
- Have pre-existing relationships with prospective users;
- Set high expectations and generate momentum in platform wars;
- Have “deep pockets”.
What is the challenge of threat of envelopment?
How do high-quality "superstar" video games affect hardware unit sales?
- Introduction of superstar (N=89) increases video game console sales by an average of 14% (167,000 units) over a period of five months.
- Superstars display increasing returns (both in software unit sales and in hardware unit sales) to quality: quality of the game matters
- Software (video game) type does not consistently alter the impact of superstars.
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
