Platform Competition Under Network Effects: Piggybacking and Optimal Subsidization

2018 ◽  
Author(s):  
Yifan Dou ◽  
D. J. Wu
Keyword(s):  
Network Effects ◽  
Platform Competition

scholarly journals Platform Competition: A Systematic and Interdisciplinary Review of the Literature

2020 ◽  
pp. 014920632096979
Author(s):  
Joost Rietveld ◽  
Melissa A. Schilling
Keyword(s):  
Network Effects ◽  
Future Research ◽  
Review Of The Literature ◽  
Influence Strategies ◽  
Platform Competition ◽  
User Groups ◽  
Common Interests ◽  
Research Questions ◽  
Winner Takes All ◽  
Complementary Goods

Over the past three decades, platform competition—the competition between firms that facilitate transactions and govern interactions between two or more distinct user groups who are connected via an indirect network—has attracted significant interest from the fields of management and organizations, information systems, economics, and marketing. Despite common interests in research questions, methodologies, and empirical contexts by scholars from across these fields, the literature has developed mostly in isolated fashion. This article offers a systematic and interdisciplinary review of the literature on platform competition by analyzing a sample of 333 articles published between 1985 and 2019. The review contributes by (a) documenting how the literature on platform competition has evolved; (b) outlining four themes of shared scholarly interest, including how network effects generate “winner-takes-all” dynamics that influence strategies, such as pricing and quality; how network externalities and platform strategy interact with corporate-level decisions, such as vertical integration or diversification into complementary goods; how heterogeneity in the platform and its users influences platform dynamics; and how the platform “hub” orchestrates value creation and capture in the overall ecosystem; and (c) highlighting several areas for future research. The review aims to facilitate a broader understanding of the platform competition research that helps to advance our knowledge of how platforms compete to create and capture value.

scholarly journals Quality Assurance Competition Strategy under B2C Platform

2016 ◽  
Vol 2016 ◽  
pp. 1-5
Author(s):  
Yunmiao Gui ◽  
Bengang Gong
Keyword(s):  
Quality Assurance ◽  
Network Effects ◽  
Competition Strategy ◽  
Platform Competition ◽  
Competitive Strategies ◽  
Control Rights ◽  
Managerial Decisions ◽  
Better Than

This paper examines the platform competition strategy in offering quality assurance policy based on two-sided B2C markets with buyers and sellers who trade through the B2C platform. We model this as a strategy decision whether control rights of quality assurance level are better held by the seller or by the platform. Whether the seller or the platform that provides quality assurance policy is preferred depends on their influence on network effects. We show that the seller and the platform have no strong intention to improve the quality assurance level in the monopoly markets. When all buyers multihome and all sellers single-home, sellers who hold the control rights of quality assurance are better than platforms. However, platforms that hold quality assurance drive more profits than sellers in the B2C markets where all buyers and all sellers multihome. Our findings connect platform competitive strategies to market and microfoundation of quality, which applies directly to managerial decisions in the B2C two-sided platform.

Platform Competition Under Network Effects: Piggybacking and Optimal Subsidization

2021 ◽  
Author(s):  
Yifan Dou ◽  
D. J. Wu
Keyword(s):  
Price Competition ◽  
Prisoner's Dilemma ◽  
Network Effects ◽  
Prisoner’S Dilemma ◽  
Research Note ◽  
Platform Competition ◽  
The Cross

A repeated challenge in launching a two-sided market platform is how to ignite the cross-side network effects to jump-start adoption. This research note studies “piggybacking”—expanding the focal market to recruit exclusive users from external networks—as a new and nonpricing control to launch platforms in conjunction with pricing controls. We first consider consumer-side piggybacking. Our results provide a rich set of novel insights into strategies that platforms use to monetize exclusive access to external users with nontrivial characterizations of the interplay among piggybacking, cross-side network effects, and price competition. We identify conditions when piggybacking is profit improving and when it leads to a prisoner’s dilemma, depending on the piggybacking cost and strengths of cross-side network effects. Among others, we show that piggybacking may intensify rather than ease price competition. We then consider provider-side piggybacking, and we show that the insights are qualitatively the same as consumer-side piggybacking except that the prisoner’s dilemma disappears if piggybacking providers multihome.

Bundling, Vertical Differentiation, and Platform Competition

2018 ◽  
Vol 17 (1) ◽  
pp. 1-23 ◽  
Author(s):  
Keke Sun
Keyword(s):  
Network Effects ◽  
Vertical Differentiation ◽  
Pricing Strategy ◽  
Platform Competition ◽  
Indirect Network Effects ◽  
Negative Effect ◽  
Complementary Goods ◽  
Two Sides ◽  
Positive Effect

Abstract This paper studies the bundling strategies of two firms that each sell a horizontally differentiated platform and a complementary good. When the complementary goods are vertically differentiated, the firm that sells the superior one can commit to a more aggressive pricing strategy through bundling. In the presence of asymmetry in externalities between the two sides in the platform market, bundling may be profitable without foreclosing the rival when platforms implement cross subsidies from the high-externality side (developers) to the low-externality side (consumers). Bundling has a positive effect on welfare because it allows for better internalization of the indirect network effects and reduces the developer cost of multi-homing, but it also has a negative effect because some consumers consume less-preferred components. Consequently, bundling is socially desirable when platforms are not too differentiated and the vertical differentiation between the complementary goods is high.

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