Specialized Markets in China
Chapter 2: Analytical Framework
Source: Copyright © 2006, Huang Xiaochun. Figure 2.1 A leading sock company established by a former Yiwu Market booth-keeper 2.1 A FRAMEWORK FOR THE ANALYSIS OF THE SPECIALIZED MARKET: THE MARKET PLATFORM There is a large imbalance between the thriving development of the specialized market and the underestimations of the specialized market studies. In the author’s opinion, this has primarily resulted from a lack of an appropriate analytical framework. Hagiu (2007) was the first to combine the literature on market microstructure and intermediation 17 M2920 – DING 9781781006276 PRINT.indd 17 20/06/2012 13:15 18 Market platforms, industrial clusters and small business dynamics (Rubinstein and Wolinsky 1987; Stahl 1988; Biglaiser 1993; O’Hara 1995; Spulber 1996a, 1996b; Rust and Hall 2003), and the literature on two-sided markets, which is an important field of the platform studies (Schmalensee 2002; Caillaud and Jullien 2003; Rochet and Tirole 2003, 2006; Evans 2003; Armstrong 2006; Hagiu 2006a, 2006b). He pointed out that there are two polar strategies for market intermediation, namely the merchant mode and the two-sided platform mode.1 In order to understand specialized markets, we must first realize that their nature is nothing but a two-sided platform. The general differences between the merchant mode intermediary and the two-sided platform mode intermediary are as follows. In the merchant mode, sellers sell goods to the merchants and then the merchants sell goods to the buyers. In this process, the ownership of the goods changes hands from the sellers to the merchants, and then to the buyers. Wal-Mart can be...
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