The value of incumbency in heterogeneous platforms

Crémer, Jacques and Gary Biglaiser

No 11207, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the dynamics of competition in a model with network effects, an incumbent and entry. We propose a new way of representing the strategic advantages of incumbency in a static model. We then embed this static analysis in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two platforms will emerge at equilibrium; explore the reasons why these inefficient equilibria arise; and compute the profits of the incumbent when there is only one platform at equilibrium.

Keywords: Network externalities; Network effects; Plaforms (search for similar items in EconPapers)
JEL-codes: L12 L13 L86 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-com, nep-ict, nep-mic, nep-mkt and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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