Two-Sided Network Effects: A Theory of Information Product Design
Management Science
Should We Wait? Network Externalities, Compatibility, and Electronic Billing Adoption
Journal of Management Information Systems
Information Goods and Vertical Differentiation
Journal of Management Information Systems
Journal of Management Information Systems
Design and Ownership of Two-Sided Networks: Implications for Internet Platforms
Journal of Management Information Systems
Information Goods vs. Industrial Goods: Cost Structure and Competition
Management Science
Journal of Management Information Systems
The Impact of Network Externalities on the Competition Between Open Source and Proprietary Software
Journal of Management Information Systems
Online and Offline Demand and Price Elasticities: Evidence from the Air Travel Industry
Information Systems Research
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Technology is an important factor underlying the value propositions of intermediary platforms in two-sided markets. Here, we address two key questions related to the effect of technology in platform markets. First, how does technology asymmetry affect competition between platforms? Second, how does it affect the incentives for platforms to collaborate? Using a game-theoretic model of a two-sided market where technology strongly influences network value, we show that small asymmetries in platform technologies can translate into large differences in their profitability. We find that technology improvements by the inferior platform do not significantly increase its profits, but can reduce opportunities for fruitful cooperation, since collaboration is less likely in markets with closely matched competitors. We also show that collaboration is most profitable when it takes the form of direct network interconnection. Interestingly, collaboration may provide incentives for a dominant platform to accommodate entry, where it would not otherwise do so.