The New Palgrave Dictionary of Economics

Living Edition
| Editors: Matias Vernengo, Esteban Perez Caldentey, Barkley J. Rosser Jr

Online Platforms, Economics of

Living reference work entry


Following the Internet’s widespread adoption, much economic work has studied ‘online platforms’: firms that mainly interact with consumers in cyberspace. This article surveys such work, focusing on the ways in which traditional economic models have been adapted to incorporate novel aspects made relevant by the Internet. This literature can be divided roughly into two categories: broad-brush study of the competition between platforms and more fine-grained study of the ways in which users and platforms interact with one another. The former focuses on extending oligopoly theory to include ‘consumption externalities’; the latter extends auction and search theory to a world of precisely measureable actions.


Consumption externalities Economics of the internet Electronic commerce Multi-sided platforms Network effects Search engines Social networks Sponsored search auctions Two-sided markets 

JEL Classification

D40 D43 D44 L10 L14 
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I thank Catherine Tucker and Glen Weyl for their helpful comments, and I gratefully acknowledge the financial assistance of Project 20121087916 supported by the Tsinghua University Initiative Scientific Research Program and Project 71203113 supported by the National Natural Science Foundation of China.


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Authors and Affiliations

  1. 1.