Management and Economics of Platforms at LMU München

Flashcards and summaries for Management and Economics of Platforms at the LMU München

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Study with flashcards and summaries for the course Management and Economics of Platforms at the LMU München

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

One sided market (or traditional market)

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Two-sided markets can be categorized:
Audience-makers

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Two-sided markets can be categorized:
Market-makers

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Two-sided markets can be categorized:
Demand coordinators

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Transactions costs

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Transactions costs can be classified in three groups

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Direct network effects

Positive

Negative

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Indirect network externalities (cross-side or cross-group externalities)

Positive

Negative

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First party vs. third party complementors

Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

first-party complementors can generate three scenarios

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Standard battles

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Pro and cons of standardization

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Exemplary flashcards for Management and Economics of Platforms at the LMU München on StudySmarter:

Management and Economics of Platforms

One sided market (or traditional market)
  1. A firm supplies a good or a service.
  2. Price depends on the cost structure of the firm, the competitive environment and the elasticity of demand.

Consumers choose to buy or not the good. Their decision depends on their tastes and budget constraints.

Management and Economics of Platforms

Two-sided markets can be categorized:
Audience-makers

match advertisers to audiences.
• E.g. Web search, social media, newspapers.

Management and Economics of Platforms

Two-sided markets can be categorized:
Market-makers

enable members of distinct groups to transact with each others.
• E.g. Marketplaces, online dating, interim employment agency.

Management and Economics of Platforms

Two-sided markets can be categorized:
Demand coordinators

do not strictly sell transaction. They make goods and services which
generate indirect network effects.
• E.g. Payment systems, video games consoles, operating systems.

Management and Economics of Platforms

Transactions costs

Transactions costs are costs incurred by agents when making an economic exchange.

Management and Economics of Platforms

Transactions costs can be classified in three groups

Search and information costs, which are related to the effort needed to compare prices
and quality of available alternatives.

Bargaining costs, which are related to the effort needed to find a good agreement with
the other agent.

Policing and enforcement costs
, which are related to ensuring that the other agent sticks to the contract and, if not, taking actions.

Management and Economics of Platforms

Direct network effects

Positive

Negative

Direct network effects
when each group’s members have references regarding the number of users in their own group.

Positive
“I prefer to purchase games on Steam rather than on Epic Games because most of my friends
use Steam and I like to communicate with them via the chat provided by the platform.”

Negative
“I only develop mobile games for iOS because there are already a lot developed for Android,
what would make competition tough.”

Management and Economics of Platforms

Indirect network externalities (cross-side or cross-group externalities)

Positive

Negative

Indirect network externalities (cross-side or cross-group externalities)
when members of at least one group have a preference regarding the number of users in the
other group.

Positive
“I choose Visa rather than Mastercard because there are more merchants accepting Visa where
I live”

Negative
“I use DailyMotion rather than Youtube because there is too much advertising on Youtube”

Management and Economics of Platforms

First party vs. third party complementors

The platform owner has the alternative to engage with first-party complementors (FPC) or thirdparty
complementors (TPC).

While third-party complementors are independent producers/developers from the platform, firstparty
complementors are offered by the platform owner on its own marketplace.

Management and Economics of Platforms

first-party complementors can generate three scenarios

No impact
The integration has no if little effect on third-party complementors and users can still
complete the same tasks without major change and effort
• Δ0 in the demand of third-party complements AND ↑ demand of first-party
complements

Substitution effect
Users derive additional utility from the tighter integration between the platform owner
and first-party complementors à substitution effect
• ↓ demand of third-party complements AND ↑ demand of first-party
complements

Indirect positive spillovers
The integration fosters sharing as a common behavior among users à indirect
positive spillovers on third-party complements
• ↑ demand of third-party complements AND ↑ demand of first-party
complements

Management and Economics of Platforms

Standard battles

Circumstances of a Standard Battle
§ In a standard battle multiple firms compete for the market and not in the market.
§ A standard battle is more likely if
• firms are symmetric in their market and technology positions,
• the standards battle does not delay consumer acceptance of the technology, and
• intra-technology competition is likely to dissipate potential industry profits.

In a standard battle, firms can use the following strategies
§ Establishing a large installed base quickly and visibly e.g. by dynamic or penetration pricing
§ Public commitments to low prices over the long term
§ Managing consumers’ expectations
§ Strategic pre-announcement
§ Improve the relative qualities of the own technology
§ Offering a sufficient supply of complementary goods
§ Pre-emption (trade off between quality and timing)
§ Licensing to build up a critical mass of hard- and/or software
§ Acquiring a rival firm

Management and Economics of Platforms

Pro and cons of standardization

Pros of standard setting
– Standards lead to faster market growth.
– Consumers benefit as search and switching costs are reduced.
– The risk of excess inertia is lowered.

Cons of standards setting
-Standards reduce the scope for product differentiation.
-Price competition can be intense among firms using the same standard.
– The selected standard may not be the efficient one. Because of lock-in effects and excess
inertia, it may become difficult to switch to a better one.

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Selected Topics in Organizational Behavior

Electronic Commerce (Digital Business)

Management and Economics of Network Industries (Technology and Innovation)

Wissenschaftstheorie

Managing the Front End of Innovation (Technology & Innovation)

Marketing & Strategy

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Technik des betrieblichen Rechnungswesens

Mikroökonomie

Unternehmensrechnung

Statistik

Digital Media & Business

Kommunikationswissenschaften

Einführung in die PR

Unternehmensrechnung

Externes Rechnungswesen

Privatrecht

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