1. Understanding Platforms
Taposh Dutta Roy
taposh.dr@gmail.com
What is a platform?
Platform is a set of components and rules
employed in common in most user transactions
(Boudreau 2008). Components include
hardware, software and services module, along
with an architecture that specifies how they fit
together (Henderson and Clark 1990). Rules are
used to coordinate network participant
activities. They include standards that ensure
compatibility among different components,
protocols that govern information exchange,
policies that constraint user behavior, and
contracts that specify terms of trade and the
rights and responsibilities of network
participants.
Platform-mediated network
A platform-mediated network comprises of
users whose transactions are subject to direct
or indirect network effects, along with one or
more intermediaries that facilitate user’s
transactions.
Platforms differ from in several important
aspects from vertical contracting. They are not
the final end users of the content and instead
compete in a “downstream” market for
consumers. While in standard vertical
contracting, the “upstream” firm typically has
all the buying power, in platform world the
“downstream platforms” are bidding and
competing for content.
Open or closed platforms
Platforms can be classified as open or closed. A
platform is considered “open” when –
1. Restrictions are not placed on
participation in its development,
commercialization or use
2. Any restrictions – e.g. requirements to
conform with technical standards or
pay licensing fees – are reasonable and
non-discriminatory i.e. they are applied
uniformly to all potential platform
participants.
References:
1. Exclusivity and Control by Andrei Hagiu
and Robin S. Lee, Journal of Economics
and Market strategy, Volume 20, Fall
2011.
2. Boudreau, K. (2008) “Opening the
platform vs opening the complementary
good? The effect of product innovation
in hand-held computing”, HEC Working
paper SSRN: abstract=1251167