Amateurs Crowds & Professional Entrepreneurs as Platform Complementors
Kevin J. Boudreau
No 24512, NBER Working Papers from National Bureau of Economic Research, Inc
Platforms often have “crowds” of amateurs working on them as complementors, in other cases professional entrepreneurs—or both. What can a platform owner do to implement these outcomes? I document evidence on mobile app developers showing that just small, incremental changes in platform design—related to the bare minimum costs required to build an app and factors affecting non-pecuniary payoffs—can lead the “bottom-to-fall-out” of the market to amateurs. Where the bottom-falls-out, there is a flood of lowest-quality developers who nonetheless are long-lived on the platform and engage in relatively high development activity. I find no evidence that amateurs crowd-out development activity of top developers in this context. Moreover, the bottom-falling-out is associated with the generation of significantly greater numbers of highest-quality products. I discuss several interpretations.
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