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Platform responses to entry in a local market with mobile providers

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  • Zhou, Yongyi
  • Zhang, Yulin
  • Goh, Mark

Abstract

This paper investigates how an incumbent platform should respond to the advertisement of an entrant platform in a local market of mobile service providers. Our game theoretic results suggest that an incumbent platform should lower its price to respond to a new entrant platform only when the advertisement intensity of the entrant exceeds a threshold value, albeit hurting profitability. Furthermore, we show that the mobile rate always benefits the incumbent, but does not necessarily hurts the entrant. In particular, an increase in the mobile rate ekes greater market share for the entrant, albeit less profitability. We extend the current model to the case of substitutability on both sides, different initial utilities, and the incumbent not capturing all mobile providers, to draw managerial insights.

Suggested Citation

  • Zhou, Yongyi & Zhang, Yulin & Goh, Mark, 2023. "Platform responses to entry in a local market with mobile providers," European Journal of Operational Research, Elsevier, vol. 309(1), pages 236-251.
    • Handle: RePEc:eee:ejores:v:309:y:2023:i:1:p:236-251
    DOI: 10.1016/j.ejor.2023.01.020
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