BUS 478 Chapter Notes - Chapter Article: Market Failure, Vertical Integration, Switching Barriers

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 478
• Professor: Pek- Hooi Soh

Document Summary

Create value by reducing search costs/transaction costs. Msps = technologies/products/services that create value primarily by enabling direct interactions b/t 2+ customer/participant groups. High switching costs necessary to keep rivals & new entrants at bay. Economies of scale: average cost of serving customer/enabling transaction declines w/ total # of customers/transactions. Usu have high up-front (fixed) dvlpt costs & low marginal costs to add users. In some cases, # is constrained by choice of industry. More sides lead to potentially larger cross-side network effects, larger scale & potentially diversified sources of revenues. Can always start out w/ fewer sides & partially vertically integrate missing sides. May not be economically viable for sides to exist independently. Risk of creating too much complexity & conflicts of interest. Need to please diff sides constrains msp"s ability to innovate. If cost of building & implementing less than value created for sides served, include them.