The value of incumbency for heterogeneous platforms

Gary Biglaiser and Jacques Crémer

No 16-630, TSE Working Papers from Toulouse School of Economics (TSE)

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 and embed it in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two platforms emerge at equilibrium; explore the reasons why these inefficient equilibria arise; compute the profits of the incumbent and demonstrate that the incumbency advantage does not improve much, if at all, when going from a static to a dynamic framework.

Date: 2016-03, Revised 2016-11
New Economics Papers: this item is included in nep-com, nep-mic and nep-net
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:30270

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