Platform Competition and Market Design
Friday, Jan. 6, 2017 1:00 PM – 3:00 PM
- Chair: Marc Rysman, Boston University
Multidimensional Platform Design
AbstractSuccessful platforms attract not just many users, but also those of the right kind. "The right kind of user" is one who can either be directly monetized or who differentially attracts other valuable users. Bonacich centrality on the network of user sorting with direct value of monetization captures this feedback loop and thus characterizes the value of user characteristics. We use this value to determine optimal steady-state platform design and reliable means for platforms to reach such a steady state. We apply these results respectively to explain the dynamic growth strategy of social networks and urban development policies of cities.
Will the Market Fix the Market? A Theory of Stock Exchange Competition and Innovation
AbstractWe use theory and data to develop a new model of stock exchange competition. We then use the model to examine whether a recently proposed market design, frequent batch auctions, can successfully enter and compete against incumbent exchanges.
Discrete Pricing and Market Fragmentation: a Tale of Two-Sided Markets
AbstractThis paper is motivated by an institutional detail of stock market trading: tick size constraint, which requires quotes to be on a discrete pricing grid. Our findings suggest that this discrete pricing leads to two-sided pricing; whereas continuous pricing results in only one-sided pricing. Such discreteness gives rise to endogenous vertical differentiation among platforms, which can explain market fragmentation in the US stock exchange industry.
- G2 - Financial Institutions and Services
- L1 - Market Structure, Firm Strategy, and Market Performance