A Model of Two-Zoned Networks for Platform-Mediated Markets: Theory and Practical Applications

Abstract

Two-sided networks enabled by information technology (IT) represent an emerging type of platform-mediated market in the digital economy. Researchers have studied the associated economic and strategic issues from both theoretical and managerial perspectives; however, we have noticed inadequacy in the extant literature when observing some real-world cases that cannot be fully explained by the framework of two-sided networks. A more comprehensive model is needed to explicate the broader market structure and understand the underlying market dynamics. To achieve this aim, we propose a theoretical model of two-zoned networks. In extending the existing dimension of “side,” we add the “zone” dimension at a higher level to study two-zoned networks, which include two-sided networks as a special case. In the proposed model, two-zoned networks consist of two, two-sided networks and a core platform that serves both networks as their connection point at the nexus of two zones. Using the proposed model of two-zoned networks, we analyze four real-world business cases to demonstrate the model’s practical applications. Finally, strategic implications of this model, in terms of operational and legal ramifications, are described. We conclude with topics for future research.