IDEAS home Printed from https://ideas.repec.org/a/ids/ijcome/v9y2019i3p153-180.html
   My bibliography  Save this article

Beyond equilibrium: revisiting two-sided markets from an agent-based modelling perspective

Author

Listed:
  • Torsten Heinrich
  • Claudius Gräbner

Abstract

Two-sided markets are an important aspect of today's economies. Yet, the attention they have received in economic theory is limited, mainly due to methodological constraints of conventional approaches: Two-sided markets often exhibit non-trivial dynamics that are difficult to describe via analytical equilibrium models. We illustrate this point by revisiting a well-known equilibrium model of two-sided markets by Rochet and Tirole from an agent-based computational perspective. We identify several inconsistencies as well as implicit and implausible assumptions of the original model. These limit its explanatory power and motivate an alternative approach. The agent-based model we propose allows us to study two-sided markets in a more realistic and adequate manner: Not only are we able to compare different decision-making rules for the providers, we can also study situations with more than two providers. Thus, our model represents a first step towards a more realistic and policy-relevant study of two-sided markets.

Suggested Citation

  • Torsten Heinrich & Claudius Gräbner, 2019. "Beyond equilibrium: revisiting two-sided markets from an agent-based modelling perspective," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 9(3), pages 153-180.
    • Handle: RePEc:ids:ijcome:v:9:y:2019:i:3:p:153-180
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=100558
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Oz Shy, 2011. "A Short Survey of Network Economics," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(2), pages 119-149, March.
    2. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    3. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    4. Martin Peitz & Sven Rady & Piers Trepper, 2017. "Experimentation in Two-Sided Markets," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 128-172.
    5. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    6. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    7. Brian Arthur, W. & Ermoliev, Yu. M. & Kaniovski, Yu. M., 1987. "Path-dependent processes and the emergence of macro-structure," European Journal of Operational Research, Elsevier, vol. 30(3), pages 294-303, June.
    8. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
    9. Bendor Jonathan & Mookherjee Dilip & Ray Debraj, 2001. "Reinforcement Learning in Repeated Interaction Games," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. William Rand & Christian Stummer, 2021. "Agent‐based modeling of new product market diffusion: an overview of strengths and criticisms," Annals of Operations Research, Springer, vol. 305(1), pages 425-447, October.
    2. William Rand & Roland T. Rust & Min Kim, 2018. "Complex systems: marketing’s new frontier," AMS Review, Springer;Academy of Marketing Science, vol. 8(3), pages 111-127, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Estelle Malavolti, 2016. "Single Till or Dual Till at airports: a Two-Sided Market Analysis," Post-Print hal-01406372, HAL.
    2. Dietrich, Antje-Mareike, 2016. "Governmental platform intermediation to promote alternative fuel vehicles," Economics Department Working Paper Series 16, Technische Universität Braunschweig, Economics Department.
    3. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
    4. Jabbour, Chady & Rey-Valette, Hélène & Maurel, Pierre & Salles, Jean-Michel, 2019. "Spatial data infrastructure management: A two-sided market approach for strategic reflections," International Journal of Information Management, Elsevier, vol. 45(C), pages 69-82.
    5. Maruyama Masayoshi & Zennyo Yusuke, 2013. "Compatibility and the Product Life Cycle in Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 12(2), pages 131-155, June.
    6. Jingtao Yi & Jinqiu He & Lihong Yang, 2019. "Platform heterogeneity, platform governance and complementors’ product performance: an empirical study of the mobile application industry," Frontiers of Business Research in China, Springer, vol. 13(1), pages 1-20, December.
    7. Iñigo Herguera, 2021. "Competencia y regulación de (algunas) plataformas digitales en la UE," Working Papers 2021-10, FEDEA.
    8. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    9. Hong, Ji Hyun & Kim, Byung Cho & Park, Kyung Sam, 2019. "Optimal risk management for the sharing economy with stranger danger and service quality," European Journal of Operational Research, Elsevier, vol. 279(3), pages 1024-1035.
    10. Wu, Chi-Cheng & Chen, Ying-Ju & Cho, Yung-Jan, 2013. "Nested Network Effects in Online Free Games with Accessory Selling," Journal of Interactive Marketing, Elsevier, vol. 27(3), pages 158-171.
    11. Doh-Shin Jeon & Nikrooz Nasr, 2016. "News Aggregators and Competition among Newspapers on the Internet," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 91-114, November.
    12. Nicholas Economides, 2015. "Economic Features of the Internet and Network Neutrality," Working Papers 15-01, NET Institute.
    13. Peitz, Martin & Valletti, Tommaso, 2015. "Reassessing competition concerns in electronic communications markets," Telecommunications Policy, Elsevier, vol. 39(10), pages 896-912.
    14. Elizabeth J. Altman & Mary Tripsas, 2013. "Product to Platform Transitions: Organizational Identity Implications," Harvard Business School Working Papers 14-045, Harvard Business School, revised Sep 2014.
    15. Calvano, Emilio & Polo, Michele, 2021. "Market power, competition and innovation in digital markets: A survey," Information Economics and Policy, Elsevier, vol. 54(C).
    16. Jeitschko, Thomas D. & Tremblay, Mark J., 2014. "Homogeneous platform competition with endogenous homing," DICE Discussion Papers 166, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    17. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
    18. Justus Haucap, 2019. "Competition and Competition Policy in a Data-Driven Economy," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 54(4), pages 201-208, July.
    19. Narayanan, V.K. & Chen, Tianxu, 2012. "Research on technology standards: Accomplishment and challenges," Research Policy, Elsevier, vol. 41(8), pages 1375-1406.
    20. Lam, W., 2015. "Switching Costs in Two-sided Markets," LIDAM Discussion Papers CORE 2015024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    Keywords

    two-sided markets; network externalities; agent-based modelling; simulation; heuristic decision making; reinforcement learning; satisficing; differential evolution; evolutionary economics; market structure; IT economics; equilibrium dynamics.;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijcome:v:9:y:2019:i:3:p:153-180. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=311 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.