Electronic platforms and two-sided markets: A side-switching analysis

We define electronic platforms as two-sided markets in which two groups of agents – sellers and buyers – can switch from one side of the market to the other. Using a duopoly model, we interpret equilibrium fees and profits in terms of rewards and penalties, relative to the equilibrium without side-switching. We establish that if the group with the highest side-switching probability has the lowest externality parameter, platforms make more profit with side-switching. It is also shown that agents' heterogeneity is favorable to platform profitability.