More market awareness, more profit? Competitive environments, business expansions, and two‐sided markets

Jing Li and Yulin Zhang

Managerial and Decision Economics, 2021, vol. 42, issue 2, 249-267

Abstract: Purpose: This study presents a game‐theoretic model in which a potential entrant platform expands a new business to compete with an incumbent platform. Findings: The results indicate that the potential entrant platform will never increase the market awareness of its new business beyond a threshold value, even if it is cost‐free. In addition, the profit of the incumbent platform may be even greater when facing competition. Furthermore, the optimal pricing of the potential entrant platform depends on the network effects. Conclusion and managerial implications: In order to compete with the incumbent platform, the potential entrant platform needs to increase its market awareness rationally, and the incumbent platform may accommodate the entry of a potential entrant under certain conditions.

Date: 2021
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https://doi.org/10.1002/mde.3231

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:42:y:2021:i:2:p:249-267

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