Digital platforms already dominate the top 10 of the world’s most valuable firms. The specific characteristics of their business model, such as quick growth and market power soon after market entry, have provoked public discourse.
The Economics of Platforms
IW-Analyse
German Economic Institute (IW)
Digital platforms already dominate the top 10 of the world’s most valuable firms. The specific characteristics of their business model, such as quick growth and market power soon after market entry, have provoked public discourse.
This paper analyzes digital platforms’ business models, the reasons for their success and the challenges they present. Digital platforms offer an online forum for conducting transactions and therefore are able to dramatically reduce transaction costs, which creates value for platform users. Generally, digital platforms are aware of the high and increasing importance of data. By collecting and combining data from the different user groups, digital platforms are able to improve their service for existing users and to attract new user groups. Digital platforms’ market power and their control over large, valuable sets of data have attracted the attention of regulatory authorities and led to investigations and fines. Economic policy should aim to protect consumers while still fostering the digital platform business model.
Vera Demary / Christian Rusche: The Economics of Platforms
IW-Analyse
German Economic Institute (IW)
More on the topic
Digitalisation Index 2024: Digitalisation of the economy in Germany
The Digitalisation Index 2024 shows that the German economy has become around 14 percent more digital in the last five years. However, despite this progress, key challenges remain: The East has not been able to escape its role as the digitalisation bottom ...
IW
Crypto regulation in the EU
FC Bayern Munich footballers advertise for the crypto exchange Bitpanda, Crypto.com advertised with rapper Eminem during the NBA playoffs of the Los Angeles Lakers basketball team, whose arena was renamed “Crypto.com Arena” in 2021.
IW