How to avoid your opponent's aggressive competition? The interplay between same‐side network externality and agent information level in two‐sided markets

Abstract

This study examines platform competition in the presence of the same‐side network externality. We study the effects of same‐side network externality and agent information level on the competition. We find that if a platform possesses positive same‐side network externality and conceals adoption information, this can increase its profits and make itself the market leader. The uninformed agents make the opponent feel fewer threats from the positive same‐side network externality, so that it will not respond with aggressive competition. Furthermore, the information sharing decisions can be viewed as a coping strategy to the same‐side network externality.