SYLLABUS

Matchmakers
Using the New Economics of Multisided Platforms to Navigate the New Economy

What the Matchmakers Course Is About

Many of the most dynamic public companies, from Alibaba to Facebook to Visa, and the most valuable start-ups, such as Airbnb and Uber, are matchmakers that connect one group of customers with another group of customers. Economists call matchmakers multisided platforms because they provide physical or virtual platforms for multiple groups to get together. Dating sites connect people with potential matches, for example, and ride-sharing apps do the same for drivers and riders. Although matchmakers have been around for millennia, they’re becoming more and more popular—and profitable—due to dramatic advances in technology, and a lot of companies that have managed to crack the code of this business model have become today’s power brokers.

Don’t let the flashy successes fool you, though. Starting a matchmaker is one of the toughest business challenges, and few who try to build one, succeed.

This course explains how matchmakers work best in practice, why they do what they do, and how entrepreneurs can improve their chances for success.

Whether you’re an entrepreneur, an investor, a consumer, or an executive, your future will involve more and more multisided platforms, Matchmakers is the one course you’ll need in order to navigate this appealing but confusing world.

The Matchmakers course is built around the book by the same name authored by David S. Evans and Richard Schmalensee. These economists were among the first to analyze multisided platforms and discover their principles, and have consulted for some of the most successful platform businesses. Evans is the Chairman of Global Economics Group and holds teaching positions at the University of Chicago and the University College London. Schmalensee is the Howard Johnson Professor Emeritus of Management, and the former Dean of the School School, at MIT.

The Main Text for the Course

David S. Evans and Richard Schmalensee, Matchmakers: The New Economics of Multisided Platforms, Boston: Harvard Business School Press, 2016.

Matchmakers has 13 Chapters which walks the readers through the key business and economic concepts for multisided platforms using engaging case studies of platform successes and failures.

The Glossary: Guide to the Vocabulary of the New Economics of Multisided Platforms provides simple definitions of the many new terms that students need to learn to understand what makes many new economy firms tick. Students should use this as reference throughout the course.

The Course Lectures and Readings/Listenings

Session 1. Introduction and Basic Concepts

Matchmakers

Chapter 1: How a Matchmaker Took the Friction out of Restaurant Reservations
Chapter 3: The Technologies Behind the Explosive Growth of Matchmakers [recommended]

Other reading or listening:

Jean Tirole, Video lecture on two-sided markets, 2013.
Richard Schmalensee, “An InstantClassic: Rochet & Tirole, Platform Competition in Two-Sided Markets,” Competition Policy International 10, no. 2 (2014). https://www.competitionpolicyinternational.com/an-instant-classic-rochet-and-tirole-platform-competition-in-two-sided-markets
Andrei Hagiu, “The Last DVD Format War?” Harvard Business School, Case 9-710-443, September 15, 2011.
http://www.hbs.edu/faculty/Pages/item.aspx?num=38219

Session 3. How Multi-Sided Platforms Create Value

Matchmakers

Chapter 4: How Multisided Platforms Create Value by Finding and Reducing Transactions Costs

Other reading or listening:

Crocodile in the Yangtze: The Alibaba Story, directed by Porter Erisman (2012; New York: Purple Reel Productions and Taluswood Films).
Amazon, “Form S-1, Amendment 5,” May 14, 1997. http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-sec
David Lucking-Reilty and Daniel F. Spulber, Business-to-Business Electronic Commerce, (Journal of Economic Perspectives, 2001).

Session 4. Getting off the Ground: Ignition and Critical Mass

Matchmakers

Chapter 5: Multisided Platforms Must Secure Critical Mass, Or Else

Other reading or listening:

Jawed Karim, “YouTube: From Concept to Hypergrowth,” University of Illinois Seminar, October 21, 2006. https://www.youtube.com/watch?v=XAJEXUNmP5M
Andrei Hagiu and David B. Yoffie, “Brightcove, Inc. in 2007,” Harvard Business School Background Note 9-712-424 (2011). http://www.hbs.edu/faculty/Profile%20Files/Hagiu_Andrei_CV%2010072015_d0babdc3-ed78-4aec-b240-d0791260b4f2.pdf
David S. Evans, How Catalysts Ignite: The Economics of Platform-Based Start-Ups. PLATFORMS, MARKETS AND INNOVATION, A. Gawer, ed., Cheltenham, UK and Northampton, MA, US: Edward Elgar, 2009. Available at SSRN: http://ssrn.com/abstract=1279631

Session 5. Pricing for Profitability and Growth

Matchmakers

Chapter 6: How Balancing Prices Drives Value and Profits

Other reading or listening:

Richard Miner, “Android: Building a Mobile Platform to Change the Industry,” November 28, 2007. https://www.youtube.com/watch?v=WUrMI9ZGxQ8
“Steve Jobs iPhone 2007 Presentation,” January 9, 2007. https://www.youtube.com/watch?v=vN4U5FqrOdQ
Andrei Hagiu and Julian Wright, “Do You Really Want to Be an eBay,” Harvard Business Review, 2013. https://hbr.org/2013/03/do-you-really-want-to-be-an-ebay
David S. Evans, Andrei Hagiu, and Richard Schmalensee, Invisible Engines: How Software Platforms Drive Innovation and Transform Industries, Chapter 7 on early smart phone operating systems. Downloadable copy available here.

Session 7. Designing the Platform

Matchmakers

Chapter 8: Building Platforms to Maximize Activity and Value

Other reading or listening:

Eric Gould, Peter Pashigian, and Canice Prendergast, “Contracts, Externalities, and Incentives in Shopping Malls,” Review of Economics and Statistics 87, no. 3 (2005). http://faculty.chicagobooth.edu/canice.prendergast/research/ContractsExternalitiesAndIncentivesInShoppingMalls.pdf
Peter Pashigian and Eric Gould, “Internalizing externalities: The Pricing of Space in Shopping Malls,” Journal of Law and Economics 41, no. 1 (1998). http://www.researchgate.net/publication/24100959_Internalizing_Externalities_The_Pricing_of_Space_in_Shopping_Malls
Malcom Gladwell, "The Terrazzo Jungle," The New Yorker, March 15, 2004. http://www.newyorker.com/magazine/2004/03/15/the-terrazzo-jungle
Hanna Halaburda and Felix Oberholzer-Gee, “The Limits of Scale,” Harvard Business Review 92, no. 4 (2014). https://hbr.org/product/the-limits-of-scale/R1404G-PDF-ENG?referral=03069
Session 8. Rules and Enforcement

Matchmakers

Chapter 9: Governing Bad Behavior by Platform Participants

Other reading or listening:

David S. Evans, “Governing Bad Behavior by Users of Multi-Sided Platforms,” Berkeley Technology Law Journal 27, no. 2 (2012). http://scholarship.law.berkeley.edu/btlj/vol27/iss2/7/
Danah Boyd, “Friends, Friendsters, and Top 8: Writing Community into Being on Social Network Sites,” First Monday 11, no. 12 (2006). http://firstmonday.org/htbin/cgiwrap/bin/ojs/index.php/fm/article/view/1418/1336
Apple Developer, "App Store Review Guidelines," accessed August 27, 2015, https://developer.apple.com/app-store/review/guidelines/.
eBay, "Rules & Policy," accessed August 27, 2015. http://pages.ebay.com/help/policies/overview.htm

Session 9. Evaluating Platform Pioneers

Matchmakers

Chapter 10: Making Smart Bets on New Matchmakers

Other reading or listening:
David S. Evans and Karen Webster, “Most Platforms Can’t Scale, Will Fail,” PYMNTS.com, March 14, 2016 at http://www.pymnts.com/news/payments-innovation/2016/most-platforms-cant-scale-will-fail/
Apple, "Apple Pay Set to Transform Mobile Payments Starting October 20," October 16, 2014. https://www.apple.com/pr/library/2014/10/16Apple-Pay-Set-to-Transform-Mobile-Payments-Starting-October-20.html
Apple Special Event,” September 9, 2014. http://www.apple.com/live/2014-sept-event/

Session 10. The Transformation of Payments

Matchmakers

Chapter 11: How a Matchmaker Leapfrogged Banking and Brought Financial Inclusion to an Impoverished Country

Other reading or listening:

David S. Evans and Richard Schmalensee, Paying with Plastic, 2nd ed. (Cambridge, MA: MIT Press, 2005), Chapters 1, 3, and 6
YouTube, “M-Pesa Documentary,” January 26, 2009. https://www.youtube.com/watch?v=nEZ30K5dBWU
PYMNTS, "Google Buys Softcard Technology and Buries the Brand," PYMNTS.com, February 24, 2015. http://www.pymnts.com/news/2015/google-buys-softcard-technology-and-buries-the-brand/

Session 11. The Transformation of Retail

Matchmakers

Chapter 12: How Multisided Platforms Are Transforming Retail

Other reading or listening:

Ali Hortasçu and Chad Syverson, “The Ongoing Evolution of US Retail: A Format Tug-of-War,” NBER Working Paper 21464, August 2015. http://www.nber.org/papers/w21464
Jennifer Kasper (Group Vice President, Digital Media and Multi-Cultural Marketing), “Macy´s Goes Omni-Channel,” interview, ThinkWithGoogle, October 2014. https://www.thinkwithgoogle.com/interviews/macys-goes-omni-channel.html
Angela Ahrendt (CEO of Burberry), "Burberry’s Digital Transformation," interview by Capgemini Consulting, 2012. https://www.capgemini.com/resource-file-access/resource/pdf/DIGITAL_LEADERSHIP__An_interview_with_Angela_Ahrendts.pdf
Gary Moskowitz, "Comedy Nights and Party Supplies: How Local Video Stores Are Scrambling to Survive," Time, November 15, 2013. http://entertainment.time.com/2013/11/15/film-camp-and-party-supplies-how-local-video-stores-are-scrambling-to-survive/

Session 12. Matchmakers Uber Alles?

Matchmakers

Chapter 13: What History Teaches Us About the Future of Matchmakers

Other reading or listening:

Josh Barro, "New York City Taxi Medallion Prices Keep Falling, Now Down About 25 Percent," New York Times, January 7, 2015. http://www.nytimes.com/2015/01/08/upshot/new-york-city-taxi-medallion-prices-keep-falling-now-down-about-25-percent.html.
Paul David, “The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox,” American Economic Review 80, no. 2 (1990). https://eml.berkeley.edu/~bhhall/e124/David90_dynamo.pdf