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

Torsten Heinrich and Claudius Gräbner
Authors registered in the RePEc Author Service: Claudius Gräbner-Radkowitsch

International Journal of Computational Economics and Econometrics, 2019, vol. 9, issue 3, 153-180

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.

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. (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Working Paper: Beyond Equilibrium: Revisiting Two-Sided Markets from an Agent-Based Modeling Perspective (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijcome:v:9:y:2019:i:3:p:153-180

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