Two-sided market
Also called: Multi-sided platform · Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
A two-sided market (also called a multi-sided platform) is a platform that serves two separate groups of users, such as buyers and sellers. Each group gains more when more of the other group joins. This link between the groups is called an indirect network effect, meaning a benefit that flows across groups. Because one side attracts the other, the platform often charges one side zero and earns from the other side. That makes normal pricing and competition analysis harder.
Example
A food-delivery app serves both diners and restaurants. More diners attract more restaurants, and more restaurants attract more diners. Diners use the app largely free, while restaurants pay a commission. Search engines work the same way: free for users, paid for by advertisers. UPI apps are another case, with a zero merchant discount rate for merchants.
Don't confuse with
- Duopoly: a market with two sellers competing with each other. A two-sided market has one platform serving two groups of users.
Related concepts
- Network effects
- Switching costs
- Winner-takes-all market
- Gatekeeper platform
- Self-preferencing
- Anti-steering
- Deep discounting
- Killer acquisition