Working Paper | HBS Working Paper Series | 2007

Multi-Sided Platforms: From Microfoundations to Design and Expansion Strategies

by Andrei Hagiu

Abstract

Multi-sided platforms (MSPs), which bring together two or more interdependent groups of customers, have recently risen to economic and business prominence in many industries. This paper first lays out a simple micro-founded framework which aims to organize academic and managerial thinking about MSPs. It argues that any MSP performs one or both among two fundamental functions: reducing search costs and reducing shared transaction costs among its multiple sides. Using a variety of illustrations, the framework is then used to formulate general principles driving MSP design and expansion strategies: choosing the relevant platform "sides", deciding which fundamental activities to perform and trading off depth against scope of MSP functions.

Keywords: Multi-Sided Platforms;

Citation:

Hagiu, Andrei. "Multi-Sided Platforms: From Microfoundations to Design and Expansion Strategies." Harvard Business School Working Paper, No. 07-094, May 2007.