This document summarizes research on the evolution of two-sided markets. It presents models of how market shares converge over time based on attachment curves that represent preferential attachment. The models analyze scenarios with independent platforms and platforms forming coalitions. Key results include theorems showing market shares remain stable and conditions where coalitions are profitable for platforms. Open research questions are discussed around predicting market dynamics, stability of models with noise, and investment strategies.
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Evolution of Two Sided Markets - Yury Lifshits - WSDM 2010
1. Evolution of Two-Sided Markets Yury Lifshits @ yurylifshits Yahoo! Research http://yury.name Ravi Kumar Yahoo! Research http://research.yahoo.com/Ravi_Kumar Andrew Tomkins Google Research http://www.tomkinshome.com/andrew/ paper: http:// bit.ly/twosided
10. Research Agenda Evolution Network effect Market structure Evolution prediction Coalitions When centralization will happen? When does it make sense to form a coalition? Investment strategies When to invest? Which side of the market? Critical mass? Can we predict opportunities for snowball dynamics?
18. Technical Coalition Theorem If all market shares are below 1/sqrt(k) coalition is profitable for all distributors Corollary Coalitions are not monotone Example: 5 : 4 : 1 : 1
19. Business Coalition Theorem One can re-distribute revenue for full coalition in such a way that no subset has an incentive to walk away and form a sub-coalition.
22. Future work Algorithm for solving attachment curve equation (starting position -> stable state) Stability under noise? Predictive power? Revenue redistribution for coalitions? Investment strategies?
23. Thanks! @ yurylifshits just presented “Evolution of Two-Sided Markets” at #wsdm http:// bit.ly/twosided Please, retweet
24. An agent joins if number of opposite-side connections to current platform users is at least T You can pay uninterested agent to join How much do you have to pay to get everyone on board? Open Problem