A Framework for Observing Digital Marketplace

Abstract

A digital marketplace is a virtual platform that creates values by managing interactions and transactions among participants in a multi-sided network. It creates a business ecosystem to support all participants, especially buyers and sellers, to transact efficiently and conveniently. Lately, digital marketplaces have created significant impact and disruption in many industries all over the world. As digital marketplace firms provide innovative, efficient business models as well as supportive business ecosystems, they may disrupt conventional firms that rely on physical interactions. Equipped with digital tools for transactions and interactions and supported by digital business ecosystems, digital marketplace firms can grow quickly and hence pose a serious threat to conventional firms. This paper discusses foundation theories related to digital marketplace such as transaction cost economy, network externalities, two-sided markets, and value network and uses these theories to construct a framework for observing digital marketplace.