Natural monopolies in digital platform markets

"Multi-sided platform markets characterized by network externalities have always existed as an economic paradigm, but in different technological forms.1 The old village market place, physical shopping malls, or any traditional fair can be seen as multi-sided platform markets connecting buyers and sellers. They are all platform-meeting places where different agents that want to interact and transact with each other are brought together by an intermediary. The traditional printed ad-based newspaper is also a classic version of a platform connecting advertisers and eyeballs. More readers increase the value for advertisers that want to reach them, and readers generally are indifferent to or dislike ads. Due to these externalities across the different sides, newspapers can often be provided for free to create an audience for advertisers. Payment cards of various kind, the first twosided market closely studied in the industrial organization literature, are also a typical example of platforms, which connect merchant and cardholders concluding transactions."