Coordination vs. Identity Markets: A Structural Model of Two-Sided Platforms with Unilateral Governance

This paper introduces a structural distinction between coordination markets and identity markets within two-sided platform economics. Coordination markets are defined by outcome-dependent value creation, where platform success is measured through successful matching between participants. Identity markets are defined by identity-differentiation value creation, where platform success is measured through engagement, participation, and ranking structures rather than resolution.

We argue that identity markets emerge under three conditions: (1) the marginal cost of participation for one side approaches zero, (2) platform revenue becomes decoupled from successful matching outcomes, and (3) feedback mechanisms are asymmetrically distributed across participant groups. Under these conditions, exclusion, delay, and ranking become economically productive outputs rather than inefficiencies.

We apply this model to online labor platforms and show how filtering systems and engagement-based monetization replace coordination as the primary system function. By identifying these conditions, this paper provides a framework for understanding why 'broken' digital markets persist and how platform design can move from signaling status to resolving needs.