Exploring the formation management of two-sided platforms

Abstract

Drawing on intermediation theory, I study the formation of organisations creating decentralised marketplaces in which the firm has no direct control over transactions between buyers and sellers. I provide exploratory empirical evidence on the evolution of six platforms in two innovative industries, namely ride-sharing and custom apparel. In contrast to the literature, I find that price instruments play a comparatively limited role in the formation management of platforms. Among other instruments, firms use registration procedures and submission rules to manage access to their marketplaces. Interactions between users are chiefly managed with search and ranking instruments. This research also highlights the multi-faceted nature of affiliations between platforms and their users, which often range from informal to formal classes of affiliation.