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When Does the Winner Take All in Two-Sided Markets?

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Author Info
Mingchun Sun () (Global Economics, Lehman Brothers Asia Limited)
Edison Tse (Management Science and Engineering Department, Stanford University)
Abstract

We study the diffusion of competing two-sided networks using a differential game framework. We find that whether the winner takes all depends on the participation behaviour of individual agents on both sides of the market. When individual agents tend to participate in only one network, one network will dominate the market. As the tendency for joining multiple networks increases, the possibility for two networks to co-exist in the long-run also increases. Thus the steady-state market share of competing two-sided networks can be very different depending on adopters' choice of "multi-homing" or "single-homing".

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Publisher Info
Article provided by Concept Economics in its journal Review of Network Economics.

Volume (Year): 6 (2007)
Issue (Month): 1 (March)
Pages: 16-41
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Handle: RePEc:rne:rneart:v:6:y:2007:i:1:p:16-41

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Related research
Keywords: Multihoming; dynamics; differential games; tipping;

References listed on IDEAS
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  1. Gould, Eric D & Pashigian, B. Peter & Prendergast, Canice, 2002. "Contracts, Externalities and Incentives in Shopping Malls," CEPR Discussion Papers 3598, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Jean-Charles Rochet Author-Email: rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
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  3. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer, vol. 32(2), pages 353-380, August. [Downloadable!] (restricted)
  4. Anthony Dukes, 2004. "The Adverstising Market in a Product Oligopoly," Journal of Industrial Economics, Blackwell Publishing, vol. 52(3), pages 327-348, 09. [Downloadable!] (restricted)
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  7. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
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  8. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December. [Downloadable!] (restricted)
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  10. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Blackwell Publishing, vol. 52(1), pages 1-26, 03. [Downloadable!] (restricted)
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  11. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Blackwell Publishing, vol. 50(2), pages 103-22, June. [Downloadable!] (restricted)
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  12. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany. [Downloadable!]
  13. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
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  15. Simon P. Anderson, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Blackwell Publishing, vol. 72(4), pages 947-972, October. [Downloadable!] (restricted)
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  16. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
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