More market awareness, more profit? Competitive environments, business expansions, and two‐sided markets

Abstract

Purpose: This study presents a game‐theoretic model in which a potential entrant platform expands a new business to compete with an incumbent platform. Findings: The results indicate that the potential entrant platform will never increase the market awareness of its new business beyond a threshold value, even if it is cost‐free. In addition, the profit of the incumbent platform may be even greater when facing competition. Furthermore, the optimal pricing of the potential entrant platform depends on the network effects. Conclusion and managerial implications: In order to compete with the incumbent platform, the potential entrant platform needs to increase its market awareness rationally, and the incumbent platform may accommodate the entry of a potential entrant under certain conditions.

How to avoid your opponent's aggressive competition? The interplay between same‐side network externality and agent information level in two‐sided markets

“…Platform 1 possesses the same‐side network externality on side b , and it is expressed as (possibly positive or negative) 7 . The cross‐side network externality is expressed as ( ), which measures the benefit an agent on one side enjoys from interacting with an agent from the other side (Li & Zhang, 2021; Zhou et al, 2021). Agents on side b do not have the demand information of the very same side unless platforms disclose it.…”

The implications of supplier encroachmentviaan online platform

“…The second research stream is related to the literature on platform-based markets, which is grounded in the literature on industrial economics and two-sided markets [28,29]. Although there is a rich body of work on platform economies and two-sided markets -beginning with Rochet and Tirole [13] -prior work on online retail platforms has primarily focused on platform competition [14][15][16], pricing structure [5,[17][18][19] and strategic decisions by platforms beyond pricing [3,[20][21][22]. They have focused less on the interaction between online retail platforms and offline traditional retail channels.…”

“…Although there has been a rich body of work on platform-based markets, beginning with Rochet and Tirole [13], prior work in this area has primarily focused on platform competition [14][15][16], pricing structure [5,[17][18][19] and strategic decisions [3,[20][21][22] and less on the interaction between online retail platforms and offline traditional retail channels. This interaction poses several questions that differ from those around supplier-owned channels and traditional retail channels.…”

Quality disclosure in sharing economy platform with network externality under consumer risk aversion

“…This uniform quality distribution is widely adopted in the literature on quality disclosure (Jansen, 2017; Lan et al , 2018; Levin et al , 2009). Besides, the online platform builds access between its users and other services suppliers, and each group possesses a network externality α on the other group (Li and Zhang, 2021; Zhou et al , 2021) [1].…”