The economics of platforms in a Walrasian framework
Name
SSRN-id3625100.pdf
Description
Submitted version
Size
1.17 MB
Format
Adobe PDF
Checksum (MD5)
ce8a6030dd6958acf435ed2c9c31ceb9
Author(s)
Jain, Anil K.
Townsend, Robert
Date Issued
September 2020
Journal
Economic Theory
Publisher
Springer Science and Business Media LLC
Citation
Jain, Anil K. and Robert M. Townsend. "The economics of platforms in a Walrasian framework." Economic Theory (September 2020): doi.org/10.1007/s00199-020-01309-6.
Version
Original manuscript
Abstract
We present a tractable model of platform competition in a general equilibrium setting. We endogenize the size, number, and type of each platform, while allowing for different user types in utility and impact on platform costs. The model is applicable to the recent growth in digital currency platforms. The economy is Pareto efficient because platforms internalize the network effects of adding more or different types of users by offering type-specific contracts that state both the number and composition of platform users. Using the Walrasian equilibrium concept, the sum of type-specific fees paid cover platform costs. Given the Pareto efficiency of our environment, we argue against the presumption that platforms with externalities need be regulated.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1007/s00199-020-01309-6
