The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Digital Marketplaces

  • Andrey Fradkin
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_3052

Abstract

Digital marketplaces represent a new and important organizational form in the economy. Since their emergence in the mid 1990’s, they have transformed many industries including accommodation, retail, and transportation. I start this entry by outlining the ways in which digital marketplaces differ from traditional firms. I then discuss three research areas relating to digital marketplaces. The first research area concerns the determinants of marketplace diffusion and its effects. The second concerns the economics of digital market design, with an emphasis on search and matching, pricing, and trust and safety mechanisms. The last research area is about policy issues prompted by digital marketplaces. I conclude by discussing new research topics relating to emerging technologies and continued marketplace growth.

Keywords

Industrial organization Digital marketplaces Peer-to-peer markets Search and matching Market design Marketplace design Digitization Structural change Sharing economy Reputation systems 

JEL Classification

J2 J4 L1 L15 L2 L5 L86 M13 
This is a preview of subscription content, log in to check access.

Bibliography

  1. Aguiar, Luis, and Joel Waldfogel. 2016. Quality predictability and the welfare benefits from new products: Evidence from the digitization of recorded music. National Bureau of Economic Research working paper 22675.Google Scholar
  2. Aperjis, Christina, and Ramesh Johari. 2010. Optimal windows for aggregating ratings in electronic marketplaces. Management Science 56 (5): 864–880.CrossRefGoogle Scholar
  3. Backus, Matthew, and Gregory Lewis. 2016. Dynamic demand estimation in auction markets. Cambridge: National Bureau of Economic Research.CrossRefGoogle Scholar
  4. Baye, Michael R., and John Morgan. 2001. Information gatekeepers on the Internet and the competitiveness of homogeneous product markets. American Economic Review 91: 454–474.CrossRefGoogle Scholar
  5. Bodoh-Creed, Aaron, Joern Boehnke, and Brent Richard Hickman. 2016. How efficient are decentralized auction platforms? Manuscript.Google Scholar
  6. Bolton, Gary, Ben Greiner, and Axel Ockenfels. 2012. Engineering trust: Reciprocity in the production of reputation information. Management Science 59 (2): 265–285.CrossRefGoogle Scholar
  7. Cabral, Luís, and Ali Hortaçsu. 2010. The dynamics of seller reputation: Evidence from eBay*. The Journal of Industrial Economics 58 (1): 54–78.CrossRefGoogle Scholar
  8. Cabral, Luis M.B., and Lingfang (Ivy) Li. 2014. A dollar for your thoughts: Feedback-conditional rebates on eBay. Social Science Research Network SSRN scholarly paper ID 2133812. Rochester.Google Scholar
  9. Catalini, Christian and Gans, Joshua S., Some Simple Economics of the Blockchain (November 23, 2016). Rotman School of Management Working Paper No. 2874598; MIT Sloan Research Paper No. 5191–16. Available at SSRN: https://ssrn.com/abstract=2874598 or http://dx.doi.org/10.2139/ssrn.2874598
  10. Chen, Yuxin, and Song Yao. 2016. Sequential search with refinement: Model and application with click-stream data. Management Science ePub ahead of print September 28, http://dx.doi.org/10.1287/mnsc.2016.2557
  11. Coey, Dominic, Bradley Larsen, and Brennan Platt. 2016. A theory of bidding dynamics and deadlines in online retail. Cambridge: National Bureau of Economic Research.CrossRefGoogle Scholar
  12. Cohen, Peter, Robert Hahn, Jonathan Hall, Steven Levitt, and Robert Metcalfe. 2016. Using big data to estimate consumer surplus: The case of Uber. National Bureau of Economic Research working paper 22627.Google Scholar
  13. Cramer, Judd. 2016. Disruptive change in the taxi business: The case of Uber. Cambridge: National Bureau of Economic Research.CrossRefGoogle Scholar
  14. Cullen, Zoe, and Chiara Farronato. 2016. Outsourcing tasks online: Matching supply and demand on peer-to-peer Internet platforms. Manuscript.Google Scholar
  15. Dai, Weijia, Ginger Z. Jin, Jungmin Lee, and Michael Luca. 2012. Optimal aggregation of consumer ratings: An application to Yelp.com. Stanford: National Bureau of Economic Research.CrossRefGoogle Scholar
  16. Dellarocas, Chrysanthos. 2003. The digitization of word of mouth: Promise and challenges of online feedback mechanisms. Management Science 49 (10): 1407–1424.CrossRefGoogle Scholar
  17. Dellarocas, Chrysanthos, and Charles A. Wood. 2007. The sound of silence in online feedback: Estimating trading risks in the presence of reporting bias. Management Science 54 (3): 460–476.CrossRefGoogle Scholar
  18. Doleac, Jennifer L., and Luke C.D. Stein. 2013. The visible hand: Race and online market outcomes. The Economic Journal 123 (572): F469–F492.CrossRefGoogle Scholar
  19. Edelman, Benjamin G., Michael Luca, and Dan Svirsky. 2016. Racial discrimination in the sharing economy: Evidence from a field experiment. Social Science Research Network SSRN scholarly paper ID 2701902. Rochester.Google Scholar
  20. Einav, Liran, Dan Knoepfle, Jonathan Levin, and Neel Sundaresan. 2014. Sales taxes and Internet commerce. American Economic Review 104 (1): 1–26.CrossRefGoogle Scholar
  21. Einav, Liran, Chiara Farronato, and Jonathan Levin. 2016. Peer-to-peer markets. Annual Review of Economics 8: 615–635.CrossRefGoogle Scholar
  22. Einav, Liran, Chiara Farronato, Jonathan Levin, and Neel Sundaresan. Forthcoming. Auctions versus posted prices in online markets. Journal of Political Economy.Google Scholar
  23. Ellison, Glenn, and Sara Fisher Ellison. 2009. Search, obfuscation, and price elasticities on the Internet. Econometrica 77 (2): 427–452.CrossRefGoogle Scholar
  24. Ellison, Glenn, and Sara Fisher Ellison. 2014. Match quality, search, and the Internet market for used books. Cambridge: Massachusetts Institute of Technology.Google Scholar
  25. Farronato, Chiara, and Andrey Fradkin. 2017. The Welfare Effects of Peer Entry in the Accommodations Market: The Case of Airbnb. Manuscript.Google Scholar
  26. Fradkin, Andrey. 2017. Search, matching, and the role of digital marketplace design in enabling trade: Evidence from Airbnb. Manuscript.Google Scholar
  27. Fradkin, Andrey, Elena Grewal, David Holtz, and Matthew Pearson. 2017. The determinants of online review informativeness: Evidence from field experiments on Airbnb. Manuscript.Google Scholar
  28. Fraiberger, Samuel P., and Arun Sundararajan. 2015. Peer-to-peer rental markets in the sharing economy. Social Science Research Network SSRN scholarly paper ID 2574337. Rochester.Google Scholar
  29. Ge, Yanbo and Knittel, Christopher R. and MacKenzie, Don and Zoepf, Stephen, Racial and Gender Discrimination in Transportation Network Companies (October 2016). NBER Working Paper No. w22776.Google Scholar
  30. Goldman, Mathew, and Justin M. Rao. 2014. Experiments as instruments: Heterogeneous position effects in sponsored search auctions. Available at SSRN 2524688.Google Scholar
  31. Goldmanis, Maris, Ali Hortaçsu, Chad Syverson, and Önsel Emre. 2010. E-Commerce and the market structure of retail industries*. The Economic Journal 120 (545): 651–682.CrossRefGoogle Scholar
  32. Goolsbee, Austan. 2000. In a world without borders: The impact of taxes on Internet commerce. The Quarterly Journal of Economics 115 (2): 561–576.CrossRefGoogle Scholar
  33. Hagiu, Andrei, and Bruno Jullien. 2011. Why do intermediaries divert search? The Rand Journal of Economics 42 (2): 337–362.CrossRefGoogle Scholar
  34. Hagiu, Andrei, and Julian Wright. 2014. Marketplace or reseller? Management Science 61 (1): 184–203.CrossRefGoogle Scholar
  35. Hagiu, Andrei, and Julian Wright. 2016. Enabling versus controlling. Boston: Harvard Business School.Google Scholar
  36. Hall, Jonathan, and Alan B. Krueger. 2015. An analysis of the labor market for Uber’s driver-partners in the United States. Cambridge: National Bureau of Economic Research. Manuscript.Google Scholar
  37. Hall, Jonathan, Cory Kendrick, and Chris Nosko. 2016. The effects of Uber’s surge pricing: A case study. Manuscript.Google Scholar
  38. Harris, Seth B., and Alan B. Krueger. 2015. A proposal for modernizing labor laws for 21st century work: The “independent worker”. Brookings Institution. Washington D.C.Google Scholar
  39. Hortaçsu, Ali, and Chad Syverson. 2015. The ongoing evolution of US retail: A format tug-of-war. The Journal of Economic Perspectives 29 (4): 89–111.CrossRefGoogle Scholar
  40. Horton, John J. 2014. Reputation inflation in online markets. Manuscript.Google Scholar
  41. Horton, John J. 2016. Buyer Uncertainty about Seller Capacity: Causes, Consequences, and a Partial Solution. Working paper.Google Scholar
  42. Horton, John J., and Richard J. Zeckhauser. 2016. Owning, using and renting: Some simple economics of the “sharing economy”. Cambridge: National Bureau of Economic Research.CrossRefGoogle Scholar
  43. Horton, John, David G. Rand, and Richard J. Zeckhauser. 2010. The online laboratory: Conducting experiments in a real labor market. Experimental Economics 14 (3): 399–425.CrossRefGoogle Scholar
  44. Jannach, Dietmar, Paul Resnick, Alexander Tuzhilin, and Markus Zanker. 2016. Recommender systems – Beyond matrix completion. Communications of the ACM 59 (11): 94–102.CrossRefGoogle Scholar
  45. Lewis, Gregory. 2011. Asymmetric information, adverse selection and online disclosure: The case of eBay motors. The American Economic Review 101 (4): 1535–1546.CrossRefGoogle Scholar
  46. Lieber, Ethan, and Chad Syverson. 2012. Online versus offline competition. In Oxford handbook of the digital economy, ed. M. Peitz and J. Waldfogel, 189–223. Oxford: Oxford University Press.Google Scholar
  47. Luca, Michael. 2013. Reviews, reputation, and revenue: The case of Yelp.com. HBS working knowledge.Google Scholar
  48. Mayzlin, Dina, Yaniv Dover, and Judith Chevalier. 2014. Promotional reviews: An empirical investigation of online review manipulation. American Economic Review 104 (8): 2421–2455.CrossRefGoogle Scholar
  49. Nosko, Chris, and Steven Tadelis. 2015. The limits of reputation in platform markets: An empirical analysis and field experiment. Cambridge: National Bureau of Economic Research.CrossRefGoogle Scholar
  50. Pallais, Amanda. 2014. Inefficient hiring in entry-level labor markets. American Economic Review 104 (11): 3565–3599.CrossRefGoogle Scholar
  51. Quan, Thomas W., and Kevin R. Williams. 2016. Product variety, across-market demand heterogeneity, and the value of online retail. New Haven: Connecticut Cowles Foundation for Research in Economics, Yale University.Google Scholar
  52. Rochet, Jean-Charles, and Jean Tirole. 2003. Platform competition in two-sided markets. Journal of the European Economic Association 1 (4): 990–1029.CrossRefGoogle Scholar
  53. Romanyuk, Gleb. 2017. Ignorance is strength: Improving the performance of matching markets by limiting information. Manuscript.Google Scholar
  54. Sorkin, Andrew Ross. 2016. Why Uber keeps raising billions. The New York Times.Google Scholar
  55. Tadelis, Steven, and Florian Zettelmeyer. 2015. Information disclosure as a matching mechanism: Theory and evidence from a field experiment. The American Economic Review 105 (2): 886–905.CrossRefGoogle Scholar
  56. Ursu, Raluca Mihaela. 2016. The power of rankings: Quantifying the effect of rankings on online consumer search and purchase decisions. Social Science Research Network SSRN scholarly paper ID 2729325. Rochester.Google Scholar
  57. Weyl, E. Glen. 2010. A price theory of multi-sided platforms. American Economic Review 100 (4): 1642–1672.CrossRefGoogle Scholar
  58. Weyl, E. Glen, and Michal Fabinger. 2013. Pass-through as an economic tool: Principles of incidence under imperfect competition. Journal of Political Economy 121 (3): 528–583.CrossRefGoogle Scholar
  59. White, Alexander, and E. Glen Weyl. 2016. Insulated platform competition. Social Science Research Network SSRN scholarly paper ID 1694317.Google Scholar
  60. Zervas, Georgios, Davide Proserpio, and John Byers. 2015. The rise of the sharing economy: estimating the impact of Airbnb on the hotel industry. Social Science Research Network SSRN scholarly paper ID 2366898. Rochester.Google Scholar
  61. Zhang, Hongkai. 2017. Accelerated quality discovery through sponsored search advertising in online marketplaces. Manuscript.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  1. 1.MIT Sloan School of ManagementCambridgeUSA

Section editors and affiliations

  • Catherine Tucker

There are no affiliations available