The choice of suppliers and consumers: the evolutionary game equilibrium of platforms

Abstract

ABSTRACT Platforms competition affects both the structure of the whole industry and the fate of the individual companies within it. The extant studies either simply divide the participants of a platforms war into suppliers and consumers or adopt unbounded rationality assumptions. This paper constructs a game model that includes platforms, suppliers, and the final consumers. We analyze the condition and stability of each equilibrium and the impacts of the characteristics of the core and complementary products on the equilibrium by using the method of evolutionary game. Our results show the following: (1) If the two platforms initially have separate advantages in terms of the number of suppliers or consumers, there will be an equilibrium of the coexistence; otherwise, there will be an equilibrium of single platform dominating. (2) The equilibrium of a single platform dominating is more stable than that of the coexistence of multiple platforms. (3) Incidental shocks to the number of suppliers are more likely to break the coexistence equilibrium than consumers. (4) Platforms with poor core product quality and a high price for core and complementary products can coexist with other superior platforms only if the former has more consumers and suppliers at the beginning of the competition.