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Focality advantage in platform competition

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  • Hanna Halaburda
  • Yaron Yehezkel

Abstract

We consider a methodology for studying how beliefs shape platform competition based on the notion of a partial focality. The concept of focality is useful for modeling platform competition when the presence of network effects results in multiple equilibria for a certain set of prices. We illustrate how to implement this methodology in both static and dynamic competition between platforms that differ in their basic quality. The initial degree of focality affects the ability of the high‐quality platform to win the market. Yet, dynamic considerations may have a positive or negative effect on this ability.

Suggested Citation

  • Hanna Halaburda & Yaron Yehezkel, 2019. "Focality advantage in platform competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 49-59, January.
    • Handle: RePEc:bla:jemstr:v:28:y:2019:i:1:p:49-59
    DOI: 10.1111/jems.12308
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    References listed on IDEAS

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    1. Belleflamme, Paul & Peitz, Martin, 2019. "Platform competition: Who benefits from multihoming?," International Journal of Industrial Organization, Elsevier, vol. 64(C), pages 1-26.
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    7. Crémer, Jacques & Biglaiser, Gary, 2016. "The value of incumbency in heterogeneous platforms," CEPR Discussion Papers 11207, C.E.P.R. Discussion Papers.
    8. Hanna Hałaburda & Yaron Yehezkel, 2016. "The Role of Coordination Bias in Platform Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(2), pages 274-312, April.
    9. Hanna Halaburda & Yaron Yehezkel, 2013. "Platform Competition under Asymmetric Information," American Economic Journal: Microeconomics, American Economic Association, vol. 5(3), pages 22-68, August.
    10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    11. Biglaiser, Gary & Crémer, Jacques, 2016. "The value of incumbency for heterogeneous platforms," TSE Working Papers 16-630, Toulouse School of Economics (TSE), revised Nov 2016.
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    Cited by:

    1. Katz, Michael L., 2021. "Big Tech mergers: Innovation, competition for the market, and the acquisition of emerging competitors," Information Economics and Policy, Elsevier, vol. 54(C).
    2. Qihong Liu & Daniel Nedelescu & Ji Gu, 2021. "The impact of strategic agents in two-sided markets," Journal of Economics, Springer, vol. 134(3), pages 195-218, December.
    3. Yannis Bakos & Hanna Halaburda, 2019. "The Role of Cryptographic Tokens and ICOs in Fostering Platform Adoption," CESifo Working Paper Series 7752, CESifo.
    4. Amedeo Piolatto & Florian Schuett, 2022. "Information vs Competition: How Platform Design Affects Profits and Surplus," Working Papers 1325, Barcelona School of Economics.
    5. Johannes Loh & Tobias Kretschmer, 2023. "Online communities on competing platforms: Evidence from game wikis," Strategic Management Journal, Wiley Blackwell, vol. 44(2), pages 441-476, February.
    6. Yannis Bakos & Hanna Halaburda, 2022. "Overcoming the Coordination Problem in New Marketplaces via Cryptographic Tokens," Information Systems Research, INFORMS, vol. 33(4), pages 1368-1385, December.
    7. Calvano, Emilio & Polo, Michele, 2021. "Market power, competition and innovation in digital markets: A survey," Information Economics and Policy, Elsevier, vol. 54(C).
    8. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    9. Tommy Pan Fang & Andy Wu & David R. Clough, 2021. "Platform diffusion at temporary gatherings: Social coordination and ecosystem emergence," Strategic Management Journal, Wiley Blackwell, vol. 42(2), pages 233-272, February.
    10. Giovannetti, Emanuele & Siciliani, Paolo, 2023. "Platform Competition and Incumbency Advantage under Heterogeneous Lock-in effects," Information Economics and Policy, Elsevier, vol. 63(C).
    11. Yang Geng & Yulin Zhang & Jing Li, 2023. "Two-sided competition, platform services and online shopping market structure," Journal of Economics, Springer, vol. 138(2), pages 95-127, March.
    12. Federico Boffa & Amedeo Piolatto & Evila Piva & Florian Schuett, 2022. "Industry dynamics in digital markets," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 401-407, September.
    13. Siciliani, Paolo & Giovannetti, Emanuele, 2019. "Platform competition and incumbency advantage under heterogeneous switching cost — exploring the impact of data portability," Bank of England working papers 839, Bank of England.
    14. Kevin J. Boudreau, 2021. "Promoting Platform Takeoff and Self-Fulfilling Expectations: Field Experimental Evidence," Management Science, INFORMS, vol. 67(9), pages 5953-5967, September.

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