Competing Platforms

20 Pages Posted: 26 Jul 2014

See all articles by Robin S. Lee

Robin S. Lee

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: Fall 2014

Abstract

Why do competing platforms or networks exist? This paper focuses on instances where the value of a platform depends on the adoption decisions of a small number of firms, and analyzes the strategic competition among platforms to get this oligopolistic side on‐board. I study a bilateral contracting game among platforms and firms that allows for general externalities across both contracting and noncontracting partners, and examine when a market will sustain a single or multiple platforms. When firms can join only one platform, I provide conditions under which market‐tipping and/or market‐splitting equilibria may exist. In particular, even without coordination failure, congestion effects, or firm multihoming, multiple platforms can co‐exist in equilibrium despite being inefficient from the perspective of the contracting parties. Expanding the contracting space to include contingent contracts may exacerbate this inefficiency.

Suggested Citation

Lee, Robin S., Competing Platforms (Fall 2014). Journal of Economics & Management Strategy, Vol. 23, Issue 3, pp. 507-526, 2014, Available at SSRN: https://ssrn.com/abstract=2472239 or http://dx.doi.org/10.1111/jems.12068

Robin S. Lee (Contact Author)

Harvard University - Department of Economics ( email )

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Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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