Session 406

Theoretical Studies of Platform Strategies

Track C

Date: Sunday, September 21, 2014


Time: 15:45 – 17:00


Room: Luxemburgo

Session Chair:

  • Markus Reisinger, WHU - Otto Beisheim School of Management

Title: Explaining Platform Value: Usage and Membership Effects, Developers' Competition for Buyers, and Platform Strategies


  • Claudio Panico, Bocconi University
  • Carmelo Cennamo, Bocconi University

Abstract: The network size has been considered a main driver of value creation in platform markets. Recently, distinct authors have started challenging the logic that value is solely defined by the size of the network, suggesting that the quality of complementary goods provided by external developers is an important driver of platform value. Yet, we know little about the developer's incentives for producing high quality goods; of the effects of the competition for users that join the platform; of the intensity but also of the different types of network effects; and ultimately of how platform strategies enter into the picture. We analyze formally these issues, linking the developers' competition and the platform's strategy and distinguishing between usage and membership (indirect) network effects.

Title: Make-or-Buy Decisions in Platform Markets


  • Markus Reisinger, WHU - Otto Beisheim School of Management
  • Miriam Zschoche, WHU - Otto Beisheim School of Management

Abstract: This paper considers a game-theoretic model of a two-sided market in which platforms can either develop an essential input, such as an operating system (OS) for hardware devices, on their own or buy the input from an external supplier. The model incorporates indirect network externalities from software developers on users and vice versa. Developing the OS itself has the advantage that the platform later controls the price on the user and the developer side which facilitates coordination. By contrast, buying the OS leads to greater network externalities because the number of applications will be larger. We show that an asymmetric equilibrium exists in which platforms pursue different strategies. Hence, the market does not tip although network effects are large. This result contains profound managerial implications.

Title: Market Hierarchies As a Systemic Source of Organizational Performance


  • Mikko Jääskeläinen, Aalto University
  • Hana Milanov, Technical University of Munich

Abstract: Building on the current research on social evaluations of organizations, we propose that established markets have an inherent, allocation-based mechanism that leads to winner-takes-most outcomes. We develop a formal model of hierarchical market allocation, and with a dynamic simulation of this model, we derive the proposition that given non-random preferences among a relevant audience, there emerges a hierarchy among organizations that affects resource and opportunity allocation. This hierarchical allocation ultimately results in disproportional rewards for high-ranking organizations. The results imply that while the basis of the social evaluations may differ between the related concepts of reputation and status, both share a common industry-level mechanism that affects organizations’ performance.

Title: Network Externalities Revisited


  • Fernando Buendia, Monterrey Institute of Technology

Abstract: This article revises the conditions that the literature on network externalities has established for the adoption process of two competing technologies to settle down either on 100/0 or on 0/100 with probability 1. Specifically, it shows that these outcomes depend on the assumption that consumers will adopt the technology that a large number of consumers have already adopted, thus expectations are given in advance and, consequently, uncertainty and different levels of strength of network effects are eliminated implicitly from the model. To solve this problem, this paper introduces a series of network-based arbitrary functions and proves that this kind of functions are more realistic for they introduces an adequate level of uncertainty and other important parameters to the model of markets subject to network externalities.

All Sessions in Track C...

Sun: 15:45 – 17:00
Session 406: Theoretical Studies of Platform Strategies
Mon: 11:00 – 12:15
Session 405: Multi-Sided Platform Strategies
Tue: 11:00 – 12:15
Session 407: Platform and Ecosystem Emergence
Tue: 15:30 – 16:45
Session 452: Competitive Dynamics and Strategy in Platform-Based Markets

Strategic Management Society