Creating Interaction Environments: Defining a Two-Sided Market Model of the Development and Dominance of Platforms

Abstract

Interactions between individuals, both economic and social, are increasingly mediated by technological systems. Such platforms facilitate interactions by controlling and regularizing access, while extracting rent from users. The relatively recent idea of two-sided markets has given insights into the distinctive economic features of such arrangements, arising from network effects and the power of the platform operator. Simplifications required to obtain analytical results, while leading to basic understanding, prevent us from posing many important questions. For example we would like to understand how platforms can be secured when the costs and benefits of security differ greatly across users and operators, and when the vulnerabilities of particular designs may only be revealed after they are in wide use. We define an agent-based model that removes many constraints limiting existing analyses (such as uniformity of users, free and perfect information), allowing insights into a much larger class of real systems.