Submodule M4.1
Overview
The saving of search, transaction and post-transaction cost in comparison to traditional business models is one of the most important concepts underpinning the success of platform business models.
Some professors state this to be in fact the most important aspect.
Going back to the 1937 work of the Nobel Prize-winning economist Ronald Coase, we will see how internalising transaction cost was an important contributor to firms and large firms emerging in the industrial areas.
Platform business models, however, have reversed this process of internalising such costs but externalising them back to the participants of the platform by bringing them down to acceptable levels, distributing them on many shoulders and rewarding their acceptance with new value propositions.
We will be using 4 major verticals to demonstrate their importance and understand similarities & differences: Assets & Service Sharing, Social & Communication, Search & Vertical Search and eCommerce.
Key Objectives
We will learn about crucial concepts of platform business models:
Some theoretical background on
Search,
transaction and
post-transaction cost
Externalising internal (transaction) cost
Examples from:
Assets & Service Sharing,
Social & Communication,
Search & Vertical Search and
eCommerce
Note on terminology: in some cases, we summarise search, transaction and post-transaction cost to either just “transaction cost” as did Ronald Coase or “Search & Transaction” cost for the brevity – it will be obvious where we do this).