M&E

An entity that brings together different groups of economic agents and facilitates interaction among them by managing NE and therefore creating value for all participants.

1. A set of economic agents wish to interact
2. The interaction generates NE: One agent’s decisions as to whether and how much to interact affect the well-being of other agents.
3. An intermediary is more efficient in organizing the interaction.

• NE make it hard for individuals to organize interactions, even if these are valuable for everyone.
• The benefit an agent gets from joining a network depends on how many other people join as well
  • If the agent doesn’t expect anybody else to join, she doesn’t join either
  • Everybody loses, even if all would be better off joining!
• Platforms can solve this coordination problem -> valuable interactions easier to organize by reducing transaction costs.
  • Basically, platforms sell transactions costs’ reductions (not necessarily sell a product)

Even with technology easing communication (e.g. FB groups to communicate between riders and drivers) a platform still adds a great deal of value by reducing transaction costs.

• Trust issues
• Help coordination -> Dispatch based on proximity

- Within- group NE (WGNE)

- Cross- group NE (CGNE)

How does an agent’s decision to join (or how much to interact on) the platform affect the well-being of other agents in her own group?

How does an agent’s decision to join (or how much to interact on) the platform affect the well-being of other agents in another group?

- Attraction spillover

- Mutual attraction spiral

- Attraction/ Repulsion pendulum

- No group is interested in connecting with other, so interaction should simply be avoided