Group Hug: Platform Competition with User Groups

Sarit Markovich and Yaron Yehezkel

American Economic Journal: Microeconomics, 2022, vol. 14, issue 2, 139-75

Abstract: We consider platform competition for small users and a user group. One platform enjoys a quality advantage and the other benefits from favorable beliefs. We study whether the group mitigates the users' coordination problem⁠—i.e., joining a low-quality platform because they believe that other users would do the same. We find that a group that can facilitate coordination on the high-quality platform may choose to maintain the dominance of the low-quality one. Users' utility is non-monotonic in the proportion of the group. Finally, we highlight factors that motivate the group to help the high-quality platform to win the market.

JEL-codes: D85 L14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1257/mic.20190372

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