Platform Competition Research Articles

The production and platform competition with the reselling mode in the carbon neutral era

The production and platform competition with the reselling mode in the carbon neutral era

Regulating data platforms from a value of data approach

Purpose This study aims to investigate the impact of ex-ante regulatory interventions on emerging digital markets related to data sharing and combination practices. Specifically, it evaluates how such interventions influence market contestability by considering data network effects and the economic value of data. Design/methodology/approach The research uses agent-based modeling and simulations to analyze the dynamics of value generation and market competition related to the regulatory obligations on data sharing and combination practices. Findings Results show that while the promotion of data sharing through data portability and interoperability has a positive impact on the market, restricting data combination may damage value generation or, at best, have no positive impact even when it is imposed only on those platforms with very large market shares. More generally, the results emphasize the role of regulators in enabling the market through interoperability and service multihoming. Data sharing through portability fosters competition, while the usage of complementary data enhances platform value without necessarily harming the market. Service provider multihoming complements these efforts. Research limitations/implications Although agent-based modeling and simulations describe the dynamics of data markets and platform competition, they do not provide accurate forecasts of possible market outcomes. Originality/value This paper presents a novel approach to understanding the dynamics of data value generation and the effects of related regulatory interventions. In the absence of real-world data, agent-based modeling provides a means to understand the general dynamics of data markets under different regulatory decisions that have yet to be implemented. This analysis is timely given the emergence of regulatory concerns on how to stimulate a competitive digital market and a shift toward ex-ante regulation, such as the regulatory obligations to large gatekeepers set in the Digital Markets Act.

Who should pay for the return freight in e-commerce? Platforms, retailers or consumers

In the realm of e-commerce, various return freight modes are available, such as platform-bearing return freight (PP strategy), retailer-bearing return freight (RP strategy), and consumer-bearing return freight (CP strategy). The return freight strategy adopted by platforms plays a crucial role in responding to consumer behaviors. To analyze how platforms determine the optimal return freight strategies, we examine a supply chain comprising a platform, a retailer, and heterogeneous consumers, employing a Stackelberg game model to capture their decision dynamics. Our findings suggest that the platform should opt for the PP strategy only when the product profit margin is relatively low. If the platform refuses to adopt the PP strategy, then the RP strategy is preferable when consumers face extremely high consumer return freight costs; otherwise, the CP strategy is the equilibrium result. We also prove that the selection of the return freight strategies leads to changes in the property of the equilibrium. Under the CP strategy, how the product fit probability affects the optimal price depends on the procurement cost; while under the RP and PP strategies, the optimal price decreases with the fit probability. Moreover, under the PP strategy, an increase in the product fit probability does not always benefit the platform. Further, our analysis reveals that, while the PP strategy can reduce the retailer’s risk, it might negatively impact supply chain performance, which implies that cost sharing in the supply chain does not necessarily lead to a higher channel profit. We also investigate how the platform’s return freight strategies affect consumer surplus and identify regions for Pareto improvement where all parties benefit from the PP strategy. Finally, by exploring extensions like positive salvage values, partial refunds, platform competition, and differentiated return freight costs, we confirm the robustness of our findings and unveil new insights.

Advance-selling strategies under platform competition

With the competition between e-commerce platforms intensifying, advance-selling has gradually become a mainstream marketing strategy. This article establishes a mathematical model of competition between two platforms and retailers, considering four scenarios: spot-sale only, advance-selling only, spot-sale with coupons, advance-selling with coupons. The study explores the impact mechanism of platform competition on advance-selling strategies. The results show that when the advantage of product evaluation is large, the unit transaction cost is small or the product cost is low, the retailers should actively adopt the advance-selling scheme with discount pricing. Compared with low-value products, high-value products are priced higher and have greater demand, which can bring higher revenue to the retailers and the platforms. The benefits of the advance-selling scheme are limited, but the issuance of coupons could increase the revenue of both platforms and retailers, and the value of platform coupons in the spot-sale market is higher. JEL Classification: L81, C79

Complementors’ Response to Increased Platform Competition: Evidence from YouTube and Twitch

Complementors’ Response to Increased Platform Competition: Evidence from YouTube and Twitch

Blockchain adoption for product freshness traceability under platform competition

ABSTRACT With the rapid development of e-commerce, a large number of online platforms specialising in fresh product have entered the market. Previous studies have rarely considered how to efficiently deliver the product’s freshness status to customers. In this paper, we establish a game model that consists of two competitive online platforms, which operate vertically differentiated fresh product on the same market. The product freshness is uncertain due to the opaque delivery process and consumers may have the risk-averse attitude, while platforms could opt to deploy blockchain to trace the product’s logistic information in real time and eliminate the consumer’s risk-averse attitude. Our finding shows that when the platform competition and the consumer’s risk-averse attitude are high, both platforms would like to adopt blockchain technology; With the moderate platform competition and the consumer’s risk-averse attitude, neither platform wants to adopt blockchain technology. Otherwise, only one platform would like to adopt blockchain technology. Moreover, when one platform deploys blockchain, the other one can free ride and become better off. Finally, we analyse consumer surplus and social welfare under different scenarios. A win-win-win situation can be achieved among platforms, consumer surplus, and social welfare when both platforms deploy blockchain technology.

플랫폼법의 입법논의에 관한 고찰

Today, as online platform transactions become active, there is an urgent need for new legislation, tentatively known as the Online Platform Act, to regulate illegal activities of business operators that undermine fairness on online platforms and provide effective protection for consumers. This is because, even though traditional online commerce has become widespread as an online platform transaction, the E-Commerce Act, which was enacted and implemented 20 years ago, is still applied. In enacting the Online Platform Competition Promotion Act, the Fair Trade Commission is trying to introduce a pre-designation system that intensively regulates large operators through pre-designation of ‘dominant online platform operators’, which is receiving backlash from the platform industry. In other words, the government is trying to ban unfair practices such as preferential treatment and multi-homing restrictions by dominant operators by introducing this pre-designation system in the new Online Platform Act. The Fair Trade Commission’s legislative direction to pre-designate platform operators such as Google and Naver as dominant operators in order to regulate large platform operators has been disclosed, but the specific details of the bill have not yet been disclosed. In general, the key contents will be the regulation of unfair practices by platform operators, consumer protection, and designation of platform dominant operators. Through this legislation on the Online Platform Act, we will quickly respond to illegal acts in the platform market, thereby increasing the preventive effect. In addition, this will alleviate the economic burden on small business owners and consumers in the platform market, while revitalizing the market entry and activities of platform operators such as startups, which will lead to innovation and strengthening of competitiveness in the platform industry. In any case, although the industry is protesting against the pre-designation of the platform dominant operator, we hope that a more thorough review will be conducted and the legislation will be completed by reflecting the opinions of the platform industry as much as possible.

Content moderation and advertising in social media platforms

AbstractWe study the incentive of an ad‐funded social media platform to curb the presence of unsafe content that entails reputational risk to advertisers. We identify conditions for the platform not to moderate unsafe content and demonstrate how the optimal moderation policy depends on the risk the advertisers face. The platform is likely to undermoderate unsafe content relative to the socially desirable level when both advertisers and users have congruent preferences for unsafe content and to overmoderate unsafe content when advertisers have conflicting preferences for unsafe content. Finally, to mitigate negative externalities generated by unsafe content, we study the implications of a policy that mandates binding content moderation to online platforms and how the introduction of taxes on social media activity and social media platform competition can distort the platform's moderation strategies.

The Divergent Effect of Competition on Platforms: Deterring Recruits, Motivating Converts

Knowledge platforms differ in how they source their knowledge; they can be categorized as traditional (e.g., Encyclopedia Britannica, Guide Michelin) or crowdsourced (e.g., Wikipedia, Yelp). Although research has compared and contrasted the two, we study how they compete with one another. In particular, we focus on how competition from traditional platforms affects volunteers’ contributions to crowdsourced platforms. We propose a divergent effect: competition increases individual contributions from volunteers who were already active before the entry of any competitor (pre-entry contributors). However, competition also hinders recruitment and therefore leads to a decrease in total contributions from the set of volunteers who are new to the platform in a given time period (newly recruited contributors). We suggest the first effect is driven by pre-entry contributors’ ideological attachment, whereas the second is driven by lower awareness of the platform postcompetitive entry. To test our theory, we leverage and examine how the phased entry of Google Maps in different countries affects contributions to OpenStreetMap, a crowdsourced mapping platform. We find the hypothesized divergent effects and provide suggestive evidence of the underlying mechanisms. We contribute to research on crowdsourcing, volunteers’ willingness to contribute, platform competition, and on the effect of competition on organizations more broadly. Funding: The authors acknowledge the financial support of the INSEAD Alumni Fund. Supplemental Material: The online appendices are available at https://doi.org/10.1287/stsc.2022.0125 .

Platform competition with common ownership

Platform competition with common ownership

AI pricing algorithms under platform competition

AbstractPlatforms play an essential role in the modern economy. At the same time, due to advances in artificial intelligence (AI), algorithms are becoming more widely used for pricing and other business functions. Previous literature examined algorithmic pricing, but not in the context of network effects and platforms. Moreover, platform competition literature has not considered how algorithms may affect competition. We study the performance of AI pricing algorithms (Q-learning and Particle Swarm Optimization) and naïve algorithms (price-matching) under platform competition. We find that algorithms set an optimal price structure that internalizes network effects. However, no algorithm is always the best because profitability depends on the type of competing algorithms and market characteristics, such as differentiation and network effects. Additionally, algorithms learn autonomously when an equilibrium is unstable and avoid it. When algorithm adoption is an endogenous strategic decision, several algorithms can be adopted in equilibrium; we characterize the conditions for the various outcomes and show that the equilibrium and platform profits are sensitive to algorithm design changes. Overall, our research suggests that AI algorithms can be effective in the presence of network effects, and platforms are likely to adopt a variety of algorithms. Lastly, we reflect on the business value of AI and identify opportunities for future research at the intersection of AI algorithms and platforms.

Structure-conduct-performance (SCP) paradigm in digital platform competition: a conceptual framework

PurposeThe study aims to analyze factors impacting firms’ success and persistence in a digital platform competition using the structure-conduct-performance (SCP) framework. The study also includes real-life cases that are beneficial to academicians and practitioners to understand and develop strategies for success and persistence during uncertainty.Design/methodology/approachA literature review to identify the factors that impact success and persistence in a digital platform competition was conducted following Webster and Watson (2002). Findings were integrated into a SCP framework to examine and understand the identified factors’ relational impact.FindingsWhile analyzing factors under the SCP framework, all factors were divided into three categories: those impacting positively, those impacting negatively and those with ambiguous impact on the success and persistence in digital platform competition. Digital platform firms can exploit the positively impacting factors to increase market share by being distinctive from other digital platform firms and becoming dominant by withstanding competition. On the other hand, negatively impacting factors increase barriers to entry, intensify competition and reduce the distinctiveness of digital platform firms. Lastly, a few factors may have either a positive or a negative impact depending upon the particular characteristics of the firm/industry.Research limitations/implicationsThe study opens the scope for future research on empirically testing the developed conceptual framework and relationships by developing propositions to posit the possible impact of these factors on digital platforms’ success and persistence.Originality/valueThe study contributed to the existing literature by using SCP framework to analyze the factors affecting firm’s success and persistence in a digital platform competition. Also, the study has discussed the relational impact of factors rather than their impact in isolation.

E-Business Ecosystems: Understanding the Dynamics of Digital Platforms and Marketplaces

The study investigates the intricate dynamics of e-business ecosystems, focusing on factors such as network effects, platform governance, technological innovation, and regulatory scrutiny. Through a comprehensive review of literature and analysis of various perspectives, the research aims to elucidate the evolving landscape of digital platforms and marketplaces. Employing a qualitative research design, the study synthesizes insights from scholarly articles, industry reports, and expert opinions to discern patterns and trends in e-business ecosystems. The findings underscore the transformative impact of digital platforms on traditional business models, highlighting the emergence of platform-based business models and the democratization of commerce. Moreover, the study delves into the implications of these dynamics for competition, regulation, and consumer behavior within e-business ecosystems. It identifies key challenges such as platform competition, regulatory scrutiny, data privacy concerns, and cybersecurity threats, and explores strategies for addressing them. The implications of the research extend to businesses, policymakers, and scholars, informing strategic decision-making, regulatory frameworks, and future research agendas. By advancing our understanding of e-business ecosystems, the study contributes to the development of innovative solutions and strategies that drive economic growth, foster innovation, and promote inclusive prosperity.

Regulating Platform Competition in Markets with Network Externalities: Will Predatory Pricing Restrictions Increase Social Welfare?*

Regulating Platform Competition in Markets with Network Externalities: Will Predatory Pricing Restrictions Increase Social Welfare?*

Airbnb exits China: insights from platform competition

ObjetivoEste artículo de opinión pretende aportar ideas sobre la salida de Airbnb del mercado chino, concretamente desde la perspectiva de la competencia entre plataformas.Diseño/metodología/enfoqueBasándonos en la comprensión de la evolución y la competencia del mercado de alojamientos P2P en China, así como en los “efectos de red de doble filo”, este artículo de opinión ofrece una discusión en profundidad sobre la retirada de Airbnb del mercado chino.ResultadosEste documento sostiene que Airbnb enfrentó desafíos crecientes para establecer ventajas competitivas únicas frente a sus rivales locales, demostrando estos últimos una capacidad de innovación y del mantenimiento de la lealtad de sus clientes al adaptarse a la evolución del mercado. En consecuencia, esto puede inhibir a Airbnb para atraer al mercado principal y llevar a la empresa a una espiral negativa, exacerbada por efectos de red indirectos.Originalidad/valorEste estudio ofrece una visión del fracaso de un proceso de internacionalización, a partir de un análisis del entorno competitivo y de las estrategias de competencia de las plataformas de alojamiento P2P en China. Estos resultados tienen implicaciones prácticas para la aplicación de estrategias empresariales internacionales en los alojamientos P2P.

Platform acquisitions and Nash bargaining

A merger between a device-driven platform and a service developer engaged in bilateral negotiations with competing platforms can be welfare enhancing. The merger increases platform competition and can benefit consumers even when it increases the bargaining leverage of the service provider vis-à-vis rival platforms and generates opposing effects on the prices of devices and services on different platforms.

Responsible users and platform competition: A computational model

Corporate Social Responsibility (CSR) is an increasingly important topic in business, especially in the context of digital platforms where consumers and policymakers care about the social responsibility of platforms. This paper introduces the concept of responsible users, defined as users who make decisions considering their CSR preferences in platform settings. However, how responsible users may affect platform strategic behavior and competition is unclear. Therefore, we propose a computational model of platform price competition that considers the presence of responsible users. We find that CSR preferences have pro-competitive effects that reduce prices and profits in equilibrium. However, this effect depends on how large CSR preferences can be. We also explore several market asymmetries and clarify their implication for platform price structures and profits. Furthermore, we find that it only matters that users express their CSR preferences, regardless of how those preferences are generated. By integrating the responsible user concept into platform competition, our work contributes to both platform competition and CSR literature. We discuss practical implications for platform users and managers and future research opportunities.

Uncovering the Role of Hubs: A Network Science Perspective on Platform Competition

Uncovering the Role of Hubs: A Network Science Perspective on Platform Competition

Effects of Payment Interoperability and Noninteroperability on Platform Competition

Effects of Payment Interoperability and Noninteroperability on Platform Competition

If Platforms Are Exploiting Producers, Is Platform Competition the Solution?

If Platforms Are Exploiting Producers, Is Platform Competition the Solution?