What is a Two-Sided Market?
A two-sided market, also known as a two-way market or a two-sided network, serves the market originator in a dual capacity. It provides the market maker with the potential to benefit as a giver and receiver. In a two-sided market, the individual or business is lined up on both sides of the transaction, allowing them to both buy and sell in the transaction. Both user groups benefit fully from the business transaction and have a highly vested interest in each side. Market makers in a two-sided market can be customers or businesses and must be willing or prepared to both buy and sell at the predetermined prices that were quoted. In other words, a business can make an offer to consumers and then also provide resources to help the consumer in that relationship. Health organizations who act as both health insurance carriers for patients and provide health care are participating in a two-sided market. In this situation, the organization benefits by insuring the patient but it also receives it
• A two sided market consists of a platform allowing 2 groups of clients/providers to interact and which optimizes the revenue distribution among these groups with the objective of maximizing market sizes. Exemple of the video game market Crossed network effects Internal Price A Price B network Side A Side B effects Developers Consumers Network effects in action Internal effects Crossed effects • A potential market for a • Utility to a new developer developer gets bigger as more increases as the community of consumers enter the said market developers grows (shared knowledge) • The number of games available to the consumer increases with • Utility to a new consumer the number of developers increases as the community of working on the platform consumers grows (secondhand market) ..……. December 2008 • Everything you always wanted to know about Google… • 28 • Pricing of a two-sided market Price A > 0 Price A < 0 Side A Platform1 Face A Platform1 • The platform may charge a side • … or subs
