Platform pricing redux

Platforms such as Airbnb, Amazon, Apple iOS, eBay, Microsoft Windows, and Uber are ubiquitous. The two-sided nature of platform markets, however, requires a reconsideration of the conditions for profit maximization and understanding of how platforms operate. Profit-maximization in two-sided markets is characterized as an intuitive extension of the inverse elasticity pricing rule (Lerner index). This is further expressed in terms of the participants' primitives: users' reservation values and the platform's marginal cost. Differences between one- and two-sided markets are demonstrated and discussed.