A study on interplatform competition based on a Lotka–Volterra competition model focusing on network externality

Abstract

Based on a Lotka–Volterra model of ecological population competition, this paper introduces cross-network externality parameters to develop a bilateral platform dynamic competition model. Using this new model, we analyze the influence of cross-network externalities on the equilibrium market structure of platform competition and the dynamic evolution of the market structure of platform competition. First, relying on the analytical results, we explore the influence of the platform’s own cross-network externalities and the mutual inhibition effects on the equilibrium market structure of platform competition. The analysis results show that when two platforms are in a competitive relationship, the impact of the intrinsic growth rate of platform users on the coexistence area can be ignored, but the impact on the monopoly area is greater. When the growth rates of the two platforms differ greatly, the platform with the higher growth rate can easily monopolize the market, without considering the inhibitory effect of the opponent. Therefore, the optimal strategy for the platform is to compete for traffic and gain a short-term advantage. In addition, when cross-network externalities and mutual inhibition effects meet certain conditions, i.e., θi+|rji|<1, competitive platforms can maintain a stable and coexisting market structure. Second, we build a three-platform competition model to study the impact of the introduction of the third platform on the market structure and investigate the conditions under which new platforms can enter the market stably. The results show that when the new platform cannot bear the threshold of competition pressure from the duopoly, even if it improves the platform’s own cross-network externalities, the new platform cannot gain a foothold in the market. Finally, we conduct an empirical analysis of the competitive relationship between two online food delivery platform giants: Ele.me and Meituan. We verify the conclusions drawn from the theoretical research and predict the development status and trends of the online food delivery platform market.