Multihoming in Two-Sided Markets: An Empirical Inquiry in the Video Game Console Industry

Abstract

Two-sided markets are composed of platform owners and two distinct user networks that either buy or sell applications for the platform. The authors focus on multihoming-the choice of an agent in a user network to use more than one platform. In the context of the video game console industry, they examine the conditions affecting seller-level multihoming decisions on a given platform. Furthermore, they investigate how platform-level multihoming of applications affects the sales of the platform. The authors show that increased platform-level multihoming of applications hurts platform sales, a finding consistent with literature on brand differentiation, but they also show that this effect vanishes as platforms mature or gain market share. The authors find that platform-level multihoming of applications affects platform sales more strongly than the number of applications. Furthermore, among mature platforms, an increasing market share leads to more seller-level multihoming, while among nascent platforms, seller-level multihoming decreases as platform market share increases. These findings prompt scholars to look beyond network size in analyzing two-sided markets and provide guidance to both (application) sellers and platform owners.

Platform adoption in system markets: The roles of preference heterogeneity and consumer expectations

“…However, few studies on network effects are based on customer surveys and many researchers have called for more survey research (e.g. Binken & Stremersch, 2009;Dubé et al, 2010;Gandal, Greenstein, & Salant, 1999;Goldenberg, Libai, & Muller, 2010;Landsman & Stremersch, 2011;Lee, 2009;Zhu & Iansiti, 2012). Our research assesses system markets from a behavioristic perspective and thus differs from most studies in the extant literature.…”

“…Corts & Lederman, 2009;Landsman & Stremersch, 2011). For example, Nair et al (2004) analyze the effect of software variety on the diffusion of PDAs.…”

“…Gallagher and Park (2002) also propose that quality is a major driver of platform success. Other studies indicate that both variety and quality drive platform adoption (Landsman & Stremersch, 2011;Corts & Lederman, 2009). However, because most studies focus on software variety, the findings on the influence of variety and quality on platform adoption are still controversial (Marchand & Hennig-Thurau, 2013).…”

“…Our context and that of financial investments share the fundamental characteristic that risk and high uncertainty influence future development (Chakravarti & Xie, 2006;Landsman & Stremersch, 2011). This might limit expectations' influence on choice making, because consumers often focus on information that is most informative and which risk influences less when evaluating alternative options (Cox, 1967).…”

Co-Creation in the Game Industry: A Case Study in a Brazilian Developer

“…Among these innovations, we can mention the growth of mobile devices and the increasing access to the internet [4] [5]. The reduction of production costs and access new customers via new platforms are a direct result of these innovations.…”