A bottom-up simulation on competition of online interpersonal communication platforms

Tao Fu () and Liling Zou ()
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Tao Fu: Beijing University of Technology
Liling Zou: Beijing University of Technology

Journal of Economic Interaction and Coordination, 2022, vol. 17, issue 4, No 1, 897-925

Abstract: Abstract The competition of interpersonal communication platforms is a complex process affected by various factors. This paper aims to simulate and analyze this process from a bottom-up perspective. Individual platform selection serves as the micro-foundation for the study. The evolution of online interpersonal communication networks, and innovations proposed by online interpersonal communication platforms, would also impact this process by affecting individual selection on those platforms. Three scenarios were designed for this study to simulate typical modes of competition. In this regard, the simulation results were compared to practical cases. Taken together, this bottom-up simulation model could reproduce and anticipate the applied competition process associated with such platforms. Based on this model, it was found that, in any case, one online interpersonal communication platform will eventually monopolize the market, either partly or entirely. The late entrant platform, comprising a major innovation, tends to fail when competing with the incumbent monopoly due to “network externalities.” Even when two competing platforms continue to propose innovations, and they will alternately lead the competition due to those innovations, this type of replacement of their competitive positions in the market may only occur a few times and then disappear completely.

Keywords: Bottom-up simulation; Internet platform competition; Social network service (SNS); Network externalities; Internet platform innovation (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11403-022-00351-y

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