Two-sided market

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Definition

A two-sided market or two-sided network is an economic platform where there are two distinct groups of users who provide each other networks (with some possible overlap, so in fact we could instead have two distinct roles that could be performed by possibly the same users).

The key feature of two-sided networks, as opposed to one-sided networks, is that the network effects are strongest from one group to the other. If we call the two user groups A and B, then the value of the network to users in group A depends on the size and quality of the user group B, and vice versa. Network effects within each group may or may not exist, or may even be negative (if there is competition within each group).