Be alert to dangers: Collapse and avoidance strategies of platform ecosystems

Abstract

How should platform managers recognize a sudden ecosystem collapse and prevent it? While previous studies have focused on the evolution of platform ecosystems, few have examined their decline. This study investigates the phenomenon of system collapse and highlights it as another potential pattern for the evolution of platform ecosystems. By introducing a nonlinear model, the development of a mutualistic network of users shows both positive and negative feedback paths, with the extreme case of the latter collapsing. We identify the conditions of platform ecosystem collapse, and demonstrate the formation of collapse risk-avoidance strategies through a simulation example. We leverage these findings to abduct theoretical insights on ecosystem collapse to platform evolution. Doing so sheds light on the micro-process of user network dynamics, illustrates the strategic feasibility of avoiding the risk of collapse through dynamic regulation, and provides decision-makers with a new perspective on bottom-line thinking.