The Value of Incumbency in Heterogeneous Platforms

Gary Biglaiser and Jacques Crémer

No 5829, CESifo Working Paper Series from CESifo

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. We then embed this static analysis in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two platforms will emerge at equilibrium; explore the reasons why these inefficient equilibria arise; and compute the profits of the incumbent when there is only one platform at equilibrium.

Keywords: network effect; network externalities; platforms (search for similar items in EconPapers)
JEL-codes: L86 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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