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Johannes Koenen and Martin Peitz

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Paul Belleflamme and Martin Peitz

In many markets, user benefits depend on participation and usage decisions of other users, giving rise to network effects. Intermediaries manage these network effects and thus act as platforms that bring users together. This chapter reviews key findings from the literature on network effects and two-sided platforms. It lays out the basic models of monopoly platforms and platform competition, and elaborates on some routes taken by recent research.

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Paul Belleflamme and Martin Peitz

In this chapter, we elaborate on the importance of ratings, reviews and recommendations (3R systems) for the consumption of cultural goods. In general, potential consumers of cultural goods appreciate 3R systems because they incur an opportunity cost in evaluating how cultural goods fare in terms of quality and how they fit their tastes. Digital technologies and the Internet have altered the role that 3R systems play for cultural goods in three major ways. First, digital platforms have developed 3R systems to an unprecedented scale and have thereby become the main intermediaries guiding consumption of cultural goods. Second, 3R systems have been turned into strategic instruments for competing platforms. Third, the increasing influence of 3R systems on consumers’ choices has affected cultural diversity. Our aim is to provide a non-technical perspective on these three issues, informed by the existing literature.