The chicken or egg problem in platforms: An empirical study in Berlin

Since the development of digital technologies, the platform business model has begun to rise and change the landscape of the market, as more and more companies embrace this approach to business.

The main advantage of this approach came from the positive effects created by the interactions of two or more sides of the market (e.g sellers and buyers, producers and consumers), and so the first problem encountered by all platforms is how to acquire enough users from both sides, given that one side will not get on board if the other side is absent. This problem has been referred to in the literature as the “chicken or egg” problem, referring to the homonymous paradox, and solving it has strategical importance in the success or failure of the platform.

Although different kinds of strategies to overcome this problem have been identified throughout the years, most of the studies that propose to find a model for doing so start from the assumption that every solution can be used by any platform, without taking in to account contextual attributes and other factors of influence that could greatly influence the choice of which strategy adopt.

By conducting an empirical study and encompassing the geographical dimension in the research, some interesting patterns have emerged.

The geographical environment seems to be an important factor in overcoming the chicken or egg problem, and Berlin has proven to have been a favorable ecosystem for platforms. The need for a fast response to changes and the versatility of platforms is confirmed, showing that changing and evolving is an integrant part of the platform ecosystem and vital to overcoming the chicken or egg problem. It is also clear that adopting a single strategy to overcome the chicken or egg problem does not seem to be enough, and every strategy needs to be integrated either with a second strategy or some extra effort in order to work. Also, it seems that it is more beneficial for platforms to focusing on acquiring one side of the userbase, whether the demand or the supply, and focus on a particular target market instead of focusing on both at the same time.

EditionNo. 5AuthorSergio GrilloMAMaster of ArtsYear2019Download PDFcreativeindustries.berlin