Abstract
Self-publishing has become a popular e-commerce model. In the current study, we build a duopoly model to examine the impact of the network effect on competition in this emerging market. We investigate four cases depending on two factors: market size and the self-publishing platforms’ compatibility strategy. Our results show that self-publishing writers receive higher royalties compared with the scenario of no network effect except in the case of both platforms choosing incompatibility strategy in the standard market. We also find that self-publishing platforms do not always benefit from the network effect. In the standard market, the platforms will be better off only when they choose incompatibility strategy and the network effect intensity is greater than a certain threshold. In the expanded market, our computational analysis shows that the revenue of the less-known self-publishing platform increases, but the revenue of the leading platform decreases when both platforms choose compatibility strategy. Our findings also show that both self-publishing platforms prefer incompatibility strategy under a strong network effect in the standard market. Otherwise, they prefer compatibility strategy under a weak network effect. In the expanded market, self-publishing platforms have an incentive to choose incompatibility strategy.
Highlights
Self-publishing, mainly in e-book format, has become a popular e-commerce model
We investigate the impact of the network effect and compatibility strategy on the performance of selfpublishing platforms based on the results of our theoretical model
Using a duopoly model in a horizontal framework, we study online self-publishing platforms’ competition dynamics in the presence of the network effect, identify the impact of the network effect on writers’ royalty and the revenue of self-publishing platforms, and investigate the incentives of compatibility strategy
Summary
Self-publishing, mainly in e-book format, has become a popular e-commerce model. Self-publishing refers to the process in which writers directly publish their books through online self-publishing platforms without going through traditional publishers [34]. This new business model has gained popularity because it is less complex and cheaper to publish a book, faster to see the final output, easy to distribute, and most importantly, allows writers to have more control over their books [19]. Waldfogel and Reimers reported that self-publishing has increased 300% since 2006 [31]. They found that self-published books started appearing on the list of Amazon best-selling titles in 2011. The amount of self-publishing books (both print books and e-books) with registered ISBN increases from around 1.2 million in 2017 to more than 1.6 million 2018
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