Migration Between Platforms

Gary Biglaiser (), Jacques CreÌ Mer () and AndreÌ Veiga ()
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Gary Biglaiser: University of North Carolina, Department of Economics
Jacques CreÌ Mer: Toulouse School of Economics
AndreÌ Veiga: Toulouse School of Economics

No 13-18, Working Papers from NET Institute

Abstract: We develop a model of dynamic platform formation under positive platform externalities. Users can switch between an incumbent and entrant platforms, switching opportunities arise stochastically and users can choose whether to accept or reject an opportunity to switch. For homogeneous users, we characterize the incumbency advantage implied by a given equilibrium realization of the switching process. For linear utility, incumbency advantage increases in the mean and dispersion of the incumbent’s share during the switching process, which captures the momentum and coordination of the process. Heterogeneity in preferences may lead some users to delay their switching or never switch at all. Assuming that switching opportunities arrive according to a Poisson process, users switch to the entrant platform if the average preference favors the entrant and if preferences are not too polarized.

Keywords: platform Formation; Migration; Standardization and Compatibility; Industry Dynamics (search for similar items in EconPapers)
JEL-codes: D85 L14 L15 L16 R23 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-09
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-upt
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