Critical Mass and Mature Equilibria for Two-Sided Platforms, and the Strength of the Externalities Between the Sides
ten Kate Adriaan () and
Niels Gunnar ()
Additional contact information
ten Kate Adriaan: Independent Economist, Mexico City, Mexico
Niels Gunnar: Managing Partner at Oxera, Oxford, UK
Review of Network Economics, 2024, vol. 23, issue 2, 65-86
Abstract:
Critical mass is central to the development of two-sided platforms. It is the level of participation on both sides that is required to have the platform grow on its own force to a mature equilibrium. Despite this commonly understood dynamic, a formal definition of critical mass is missing in the literature on two-sided platforms, except for a proposal by Evans and Schmalensee (2010. “Failure to Launch: Critical Mass in Platform Businesses.” Review of Network Economics 9 (4)) who defined critical mass not as a single combination of platform sizes, but as a frontier in the two-dimensional space of those levels. We set out a demand model for two-sided platforms, propose a measure for the strength of the externalities between the sides and define critical mass in terms of this externality parameter. Our definition is more in line with the way critical mass is defined for one-sided networks. We also set out the conditions that must be met for the occurrence of critical mass.
Keywords: two-sided markets; network externalities; critical mass (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 L40 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://doi.org/10.1515/rne-2024-0032 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bpj:rneart:v:23:y:2024:i:2:p:65-86:n:1001
Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rne/html
DOI: 10.1515/rne-2024-0032
Access Statistics for this article
Review of Network Economics is currently edited by Lukasz Grzybowski
More articles in Review of Network Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().