Opentable Definition Multisided Platform

OpenTable has several characteristics that are common among multisided platforms. However, before relying on literature to analyse the business, first one has to determine whether a business is in fact a multisided platform or not. Retrospectively, it seems surprising that the term and type of business model “multisided platform” did not exist in 1998, considering that many of today’s most valuable firms are multi-sided platforms (Evans & Schmalensee, 2016). In recent years, scientist have proposed several definitions of multi-sided platform that generally agree in specific cases. Most definitions of multi- sided platforms focus on the presence of indirect network effects between different groups participating on the platform. However, a definite and all-encompassing definition has not yet prevailed.

Evans & Schmalensee (2007b) provide a less formal definition, which they believe captures the key characteristics of a platform business. In accordance with the two economists a business must fulfil the following criteria for being a multi-sided platform (which they refer to as an economic catalyst): It “has (a) two or more groups of customers; (b) who need each other in some way; (c) but who cannot capture the value from their mutual attraction on their own; (d) and rely on the catalyst to facilitate value creating interactions between them” (Evans & Schmalensee, 2013, p. 7). The focus on this definition is therefore on the role of the business in creating value by reducing or solving the transaction cost problem between the different groups of customers. Thereby the value is generated and determined simultaneously by the different sides of the platform. In this sense, the price structure for multisided platforms is critical to create value (Evans & Schmalensee, 2007b).

Rochet and Tirole (2004) also focused on the price structure to determine whether a business is in fact a multi-sided platform or not, which they refer to as two-sided markets. In accordance with their definition, a market is “two-sided if the platform can affect the volume of transactions by charging more to one side of the market and reducing the price paid by the other side by an equal amount.” (Rochet and Tirole, 2004, p. 40). For this reason, “the price structure matters, and platforms must design it so as to bring both sides on board” (Rochet & Tirole, 2004, p. 40). Thereby, the price structure is used to balance

Multisided Platforms 3

the usage and membership of both sides to maximize the value of the platform. So, further criteria of a market for being two-sided is that all participants need to reduce problem of transaction costs (Rochet & Tirole, 2006), which bears a resemblance to the above- mentioned definition of Evans and Schmalensee (2013). Furthermore, Rochet and Tirole (2006) also describe what a one-sided market is and thereby they distinguish to a two- sided market. According to them, “the market is one-sided if the end-users negotiate away the actual allocation of the burden (i.e., the Coase