Of Online Platforms and Medieval Markets

Equilibrium Models and Agent-Based Modeling of Two-Sided Markets

Abstract

Platform-based interactions are much more important in today’s increasingly digitalized and interconnected economic systems than they used to be in traditional ones. These interactions refer to markets where two or more user groups interact with the help of a third party, the platform. In such two-sided markets, the interaction is controlled by the platform provider. Common examples include credit card systems, software markets, and advertisement-financed online communities. As the analysis of two-sided markets largely defies modeling with equilibrium models due to the algebraic structure of the problem, the present contribution proposes an agent-based model as an alternative. It refers to a recently published article that discusses the agent-based model in more detail. Several examples illustrate the implications of the agentbased modeling approach for innovation economics and the study of technological development in particular.