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Migration Between Platforms

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Author Info

  • Gary Biglaiser

    ()
    (University of North Carolina, Department of Economics)

  • Jacques CreÌmer

    ()
    (Toulouse School of Economics)

  • AndreÌ Veiga

    ()
    (Toulouse School of Economics)

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    Abstract

    We develop a model of dynamic platform formation under positive platform externalities. Users can switch between an incumbent and entrant platforms, switching opportunities arise stochastically and users can choose whether to accept or reject an opportunity to switch. For homogeneous users, we characterize the incumbency advantage implied by a given equilibrium realization of the switching process. For linear utility, incumbency advantage increases in the mean and dispersion of the incumbent’s share during the switching process, which captures the momentum and coordination of the process. Heterogeneity in preferences may lead some users to delay their switching or never switch at all. Assuming that switching opportunities arrive according to a Poisson process, users switch to the entrant platform if the average preference favors the entrant and if preferences are not too polarized.

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    File URL: http://www.netinst.org/Biglaiser_Cremer_13-18.pdf
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    Bibliographic Info

    Paper provided by NET Institute in its series Working Papers with number 13-18.

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    Length: 22 pages
    Date of creation: Sep 2013
    Date of revision:
    Handle: RePEc:net:wpaper:1318

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    Web page: http://www.NETinst.org/

    Related research

    Keywords: platform Formation; Migration; Standardization and Compatibility; Industry Dynamics;

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    1. Jozsef Sakovics & Jakub Steiner, 2009. "Who Matters in Coordination Problems?," ESE Discussion Papers 190, Edinburgh School of Economics, University of Edinburgh.
    2. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-72, September.
    3. Ochs, Jack & Park, In-Uck, 2010. "Overcoming the coordination problem: Dynamic formation of networks," Journal of Economic Theory, Elsevier, vol. 145(2), pages 689-720, March.
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